I use a new methodological approach and larger US samples than previous studies and estimate that the sibling correlation across a range of economic outcomes is around 0.5. This suggests that half of economic inequality in the US can be attributed to family and community influences. A comparison with noneconomic outcomes suggests that individual choices rather than a simple mechanical relationship governs the intergenerational transmission of income. A decomposition of the sibling correlation suggests that the acquisition of human capital is an important channel through which family background affects future success but that noncognitive factors also play a role.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price includes VAT (USA)
Tax calculation will be finalised during checkout.
The assumption that a i and u ij are uncorrelated is purely for analytical convenience and allows one, conceptually, to divide the permanent component into a part that is perfectly correlated among siblings and a part that is perfectly uncorrelated among siblings. For the assumption that a i and v ijt are uncorrelated, I find (as did Solon et al. 1991) that there is little or no cross-sectional correlation in the transitory component.
Allowing for serial correlation in the transitory component has little effect on the results. Readers who are interested in a comparison of estimators for this case may wish to consult Mazumder (2004), which is an earlier version of this paper.
Solon et al. (1991) implicitly have a restriction of an 8-year sibling age difference as the cohorts must be born between 1951 and 1958. Similarly, Altonji and Dunn (1991) use cohorts born between 1942 and 1952 who, in practice, are observed no more than eight times when they are at least 24 years old making it relatively rare to observe siblings spaced more than 8 years apart. In principle, (Björklund et al. 2002) may observe more widely spaced siblings; however, they do not report the age distribution within families.
Altonji JG, Dunn TA (1991) Relationships among the family incomes and labor market outcomes of relatives. In: Ehrenberg RG (ed) Research in labor economics, vol 12. JAI, Greenwich, CT, pp 269–310
Altonji JG, Dunn TA (2000) An intergenerational model of wages, hours and earnings. J Hum Resour 35(2):221–257
Ashenfelter O, Zimmerman D (1997) Estimates of the returns to schooling from sibling data: fathers, sons and brothers. Rev Econ Stat 79(1):1–9
Björklund A, Eriksson T, Jantti M, Raaum O, Osterbacka E (2002). Brother correlations in earnings in Denmark, Finland, Norway and Sweden compared to the United States. J Popul Econ 15(4):757–772
Björklund A, Jantti M, Solon G (2005) Influences of nature and nurture on earnings variation. In: Bowles S, Gintis H, Osbourne-Groves M (eds) Unequal chances: family background and economic success. Princeton University Press, Princeton, NJ, pp 145–164
Case AC, Katz LF (1991) The company you keep: the effects of family and neighborhood on disadvantaged youths. NBER Working Paper 3705
Chadwick L, Solon G (2002) Intergenerational income mobility among daughters. Am Econ Rev 92(1):335–344
Corak M (2006) Do poor children become poor adults? Lessons for public policy from a cross country comparison of generational earnings mobility. Res Econ Inequal 13 (1):143–188
Corcoran M, Jencks C, Olneck M (1976) The effects of family background on earnings. Am Econ Rev 66(2):430–435
Duncan GJ, Boisjoly J, Harris KM (2001) Sibling, peer, neighbor, and schoolmate correlations as indicators of the importance of context for adolescent development. Demography 38(3):437–447
Dunifon R, Duncan GJ, Brooks-Gunn J (2001) As ye sweep, so shall ye reap. Am Econ Rev 91(2):150–154
Heckman JJ, Rubinstein Y (2001) The importance of noncognitive skills: lessons from the GED testing program. Am Econ Rev 91(2):145–149
Lee KE, Klein B, Klein R (2003) Familial aggregation of components of the multiple metabolic syndrome in the Framingham Heart and Offspring Cohorts: genetic analysis workshop problem 1. BMC Genet 4(Suppl 1):S94
Loehlin JC, Rowe DC (1992) Genes, environment, and personality. In: Chapara G, Van Heck GL (eds) Modern personality psychology: critical reviews and new directions. Harvester Wheatsheaf, New York
Mazumder B (2004) Sibling similarities, differences and economic inequality. Federal Reserve Bank of Chicago Working Paper 2004–13
Mazumder B (2005) Fortunate sons: new estimates of intergenerational mobility in the U.S. using social security earnings data. Rev Econ Stat 87(2):235–255
Meyer K, Hill WG (1991) Approximation of sampling variances and confidence intervals for maximum likelihood estimates of variance components. J Anim Breed Genet 109:264–280
Oettinger GS (1999) Does the sibling correlation in economic status vary across family and sibling pair. Manuscript, University of Texas
Osbourne M (2000) The power of personality: labor market rewards and transmission of earnings. Manuscript, University of Massachusetts
Osbourne-Groves M (2005) Personality and the intergenerational transmission of earnings. In: Bowles S, Gintis H, Osbourne-Groves M (eds) Unequal chances: family background and economic success. Princeton University Press, Princeton NJ
Rauum O, Salvanes KG, Sørensen EØ (2006) The neighborhood is not what it used to be. Econ J 116(1):200–222
Searle SR, Casella G, McCulloch C (1992) Variance components. Wiley, New York
Solon G (1992) Intergenerational income mobility in the United States. Am Econ Rev 82(3):393–408
Solon G (1999) Intergenerational mobility in the labor market. In: Ashenfalter OC, Card D (eds) Handbook of labor economics, vol 3A. Elsevier, Amsterdam, North Holland
Solon G, Corcoran M, Gordon R, Laren D (1991) A longitudinal analysis of sibling correlations in economic status. J Hum Resour 26(3):509–534
Solon G, Page ME, Duncan GJ (2000) Correlations between neighboring children in their subsequent educational attainment. Rev Econ Stat 82(3):383–392
Visscher PM (1998) On the sampling variance of intraclass correlations and genetic correlations. Genetics 149(3):1605–1614
I thank David I. Levine, Gary Solon, Dan Sullivan, Kristin Butcher, and three anonymous referees for helpful comments. I also greatly appreciate the outstanding research assistance provided by Sara Christopher. The views expressed here do not represent the views of the Federal Reserve System.
Responsible editor: Christian Dustmann
About this article
Cite this article
Mazumder, B. Sibling similarities and economic inequality in the US. J Popul Econ 21, 685–701 (2008). https://doi.org/10.1007/s00148-006-0127-2
- Sibling correlation
- Intergenerational mobility