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1 Centre for Market and Public Organisation Intergenerational Mobility and Education in the Next Generation: Forecasting Intergenerational Mobility for.

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Presentation on theme: "1 Centre for Market and Public Organisation Intergenerational Mobility and Education in the Next Generation: Forecasting Intergenerational Mobility for."— Presentation transcript:

1 1 Centre for Market and Public Organisation Intergenerational Mobility and Education in the Next Generation: Forecasting Intergenerational Mobility for Current Cohorts of Youths Paul Gregg and Lindsey Macmillan PUBLIC ORGANISATION: 11 th & 12 th June 2008

2 2 Transmission of Intergenerational Mobility I Intergenerational income mobility should be measured using the full childhood experience of the child and the full adult earnings of that child. This takes a very long-time to observe fully. So early literature used point in time estimates (e.g. Atkinson 1981) - much of the recent literature has explored the issues that emerge from: - transitory income, - life-cycle stage, - imputing long-term income (2SLS).

3 3 Transmission of Intergenerational Mobility II In addition the role of intermediate steps such as educational attainment has been brought out (Solon, 1997, Blanden et al. 2007) Also the recent literature has highlighted the importance of differences in variance of income or earnings across the generations Aim: To use these advances to explore what we can meaningfully say about mobility in younger generations Using NCDS, BCS and two cohorts from the BHPS

4 4 Exploring the Issues I Ideally we would estimate Or Which adjusts for differences in variances of income/earnings across the generations

5 5 Educational Transmission Blanden et al. (2007), following Solon, explore the drivers of intergenerational mobility that are measured at earlier ages. The process of obtaining β can be thought of in two stages.

6 6 Educational Transmission II This is informative in two ways – From a Mincer type wage equation – better educated workers have higher earnings and earnings rise differently with age according to education level. First we may be able to learn a lot about mobility patterns by the relationship between Family Income and Childs Education attainment. Second that if earnings are measured when individuals are too young their earnings will be below their permanent income as the returns to education are not yet realised – this leads to downward biases in the estimation of the level of β (Haider and Solon). Less well know is that this rise in returns also produces growing variance in earnings – so β and r will diverge

7 7 Outline Explore Patterns of Mobility Estimates by Age across the UK cohorts To decompose the estimates of mobility into that part flowing through observable education and that part that doesnt and show how these parts evolve with age. To asses whether the age related bias emanates primarily from rising returns to education with age. To compare mobility for a BHPS now aged 26 with past cohorts at similar ages. Having shown the main age bias stems from education returns. We show returns to education are similar in BCS and BHPS. To show how relationship between family income and education attainment has evolved and impute mobility through education using recent returns to education data.

8 8 Data

9 9 Age and Mobility As cohort members age from 23 to around 42 both the cov(inc, earn) and var(earn) rise. So β rises faster than r and r plateaus from are 30.

10 10 Estimated Partial Correlations for the NCDS 1958 blue BCS 1970 green and BHPS red cohorts Parental Income at age 16 and Earnings at Ages 23-46

11 11 Estimated Partial Correlations for the NCDS 1958 blue BCS 1970 green and BHPS red cohorts Parental Income at age 16 and Education related Earnings at Ages 23-46

12 12 Estimated Partial Correlations for the NCDS 1958 blue BCS 1970 green and BHPS red cohorts Parental Income at age 16 and Earnings not related to education at Ages 23-46

13 13 The income / education gradient

14 14 The income / education gradient

15 15 Findings I As cohort members age the cov(inc,earn) rises as does var(earn) This means mobility measured by β and r diverge with the former rising through to age 42, whilst the later rise more slowly and plateau at 30. The age related rise in estimates of mobility is entirely due to rising returns to education This means the estimated relationship between family income and education achieved tells us a lot about future patterns of mobility, even for cohorts not yet aged 30+.

16 16 Findings II The relationship between family income and education and income and earnings at age 26 for a new cohort of children born in (BHPS) looks very similar to that for those born in 1970 (BCS) But the relationship between family income and education for a further cohort of children born in (BHPS) shows a marked reduction in the association, primarily for attainment achieved by age 16. This can be used to predict mobility for this cohort.

17 17 Additional slides

18 18 Impact of Averaging Income and Earnings to move toward the Permanent Concept.

19 19 Impact of Averaging Income and Earnings to move toward the Permanent Concept.

20 20 Impact of Averaging Income and Earnings to move toward the Permanent Concept.


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