Abstract
Are children better off than their parents? This highly debated question in politics and economics is investigated by analysing the trends in absolute and relative intergenerational labour income mobility for Germany and the US. High quality panel data is used for this purpose; the SOEP for Germany and the PSID for the US. In Germany, 67% of sons born between 1955 and 1975 earned a significantly higher real long-run labour income than their fathers. Those with fathers from the lowest earnings bracket were particularly mobile in absolute terms. In contrast, the fraction of US sons earning more than their fathers is 60% on average for the same cohorts. Their share decreased from 66% in the 1956–60 birth cohort to 48% in the 1971–75 birth cohort, while it changed very little in Germany. Overall, absolute as well as relative labour income mobility is larger in Germany than in the US. This indicates that economic growth has been distributed more broadly in Germany than in the US. While the majority of German males has been able to share in the country’s rising prosperity and are better off than their fathers, US males continue to lose ground. Hence, Chetty et al. (Science 356:398–406, 2017) seem to be right when they say that the American Dream is slowly fading away.
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Acknowledgments
I am very grateful to my colleagues at the German Economic Institute as well as to Daniel Schnitzlein and the participants of the 13th International German Socio-Economic Panel User Conference in Berlin for many helpful comments and suggestions on earlier drafts of the paper. I would also like to express my sincere thanks to the anonymous reviewers and my editor in charge for many helpful comments and suggestions. Furthermore, I would like to thank Tina Krell and Regina Sager for proofreading my work. All remaining errors are in my responsibility.
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Open Access funding enabled and organized by Projekt DEAL. The author is employed at the German Economic Institute. He received no extra funds.
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Stockhausen, M. Like father, like son? A comparison of absolute and relative intergenerational labour income mobility in Germany and the US. J Econ Inequal 19, 667–683 (2021). https://doi.org/10.1007/s10888-021-09483-w
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DOI: https://doi.org/10.1007/s10888-021-09483-w
Keywords
- Absolute intergenerational mobility
- Inequality
- Labour income distribution
- Relative intergenerational mobility