Intergenerational earnings mobility and divorce

Abstract

This paper examines the potential effect of marital disruption on intergenerational earnings mobility. We observe the earnings of children born in 1960 and 1970 along with their biological fathers and mothers. The earnings mobility between sons and daughters relative to the earnings of their mothers and fathers is estimated. Our results suggest that divorce is associated with increased mobility, except between mothers’ and daughters’ earnings. Transition matrices reveal that the direction of the mobility is negative; children of divorced parents tend to move downward in the earnings distribution compared to children from intact families. Finally, we utilize information on the earnings mobility of siblings in dissolved families who grew up when the family was intact. The difference between pre- and post-divorce siblings is in turn compared with sibling differences in intact families.

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Notes

  1. 1.

    See Solon (1999) for a review.

  2. 2.

    This is not an unambiguous prediction, however, as the new family structure may affect preferences for investing in children’s human capital.

  3. 3.

    In Norway, the parent with child custody receives most of the public transfers plus child support from the non-custodial parent, the latter being enforced by law. This probably makes the custodial parent better off than in most other countries. See Tjøtta and Vaage (2008) for details.

  4. 4.

    See Solon (1999) for a thorough exposition and Schnitzlein (2014) for a recent application.

  5. 5.

    There is some evidence that intergenerational earnings elasticity changes over time; cf. Bratberg et al. (2005).

  6. 6.

    The upper age limit is 65 because a significant portion of the total labour force has the opportunity to retire before the official retirement age at 67.

  7. 7.

    The age intervals of parents are chosen to make the earnings averages comparable for intact and divorced families.

  8. 8.

    In families with more than two children, we use siblings that are closest in age, given the earlier mentioned restrictions.

  9. 9.

    The earnings records do not start before 1967, so we are not able to explore families who got divorced during the children’s first 10 years.

  10. 10.

    Data limitations prevent us from checking unemployment and labour market programmes at earlier ages.

  11. 11.

    It does, however, matter when we compare groups where the average age of the parents differ, as will be the case in the analysis of the sibling sample later in this section.

  12. 12.

    The younger the parents, the more observations will be lost. We have chosen 41 and 51 as average ages (instead of 40 and 50) simply because it turned out that moving from 41 to 40 represented a disproportionate loss of observations.

  13. 13.

    The only exception is parents divorced during the first 10 years of child’s life.

  14. 14.

    Our estimates are comparable to the ones in Nilsen et al. (2012) in terms of common data sources, approximately the same average age for parents and offspring and the same size of earnings window (5 years) as a basis for the calculation of permanent earnings. The samples are different, however, in that Nilsen et al. do not condition on family type, and we do not condition on gender (in Table 11).

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Acknowledgments

The authors would like to thank for helpful comments and suggestions from the Editor and two anonymous reviewers, Michael Lindquist and conference participants at EEA 2009 in Barcelona and SOLE 2011 in Vancouver. Financial support from the Research Council of Norway (grants 187912 and 199832) is gratefully acknowledged.

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Correspondence to Espen Bratberg.

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Bratberg, E., Elseth Rieck, K.M. & Vaage, K. Intergenerational earnings mobility and divorce. J Popul Econ 27, 1107–1126 (2014). https://doi.org/10.1007/s00148-014-0515-y

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Keywords

  • Intergenerational earnings mobility
  • Divorce
  • Gender differences