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Estimating intergenerational income mobility on sub-optimal data: a machine learning approach

Abstract

Much of the global evidence on intergenerational income mobility is based on sub-optimal data. In particular, two-stage techniques are widely used to impute parental incomes for analyses of lower-income countries and for estimating long-run trends across multiple generations and historical periods. We propose applying machine learning methods to improve the reliability and comparability of such estimates. Supervised learning algorithms minimize the out-of-sample prediction error in the parental income imputation and provide an objective criterion for choosing across different specifications of the first-stage equation. We use our approach on data from the United States and South Africa to show that under common conditions it can limit the bias generally associated to mobility estimates based on imputed parental income.

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Acknowledgements

We acknowledge financial support from the Italian Ministry of Education and Research, SIR Grant Project N. RBSI14KDMF.

Funding

Open access funding provided by Università degli Studi Roma Tre within the CRUI-CARE Agreement.

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Correspondence to Francesco Bloise.

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Bloise, F., Brunori, P. & Piraino, P. Estimating intergenerational income mobility on sub-optimal data: a machine learning approach. J Econ Inequal 19, 643–665 (2021). https://doi.org/10.1007/s10888-021-09495-6

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  • DOI: https://doi.org/10.1007/s10888-021-09495-6

Keywords

  • Intergenerational income mobility
  • Machine learning
  • Two-sample two-stage least squares

JEL classification

  • J62
  • D31
  • D63