Echoes of the distant past

By R.A. | WASHINGTON

IN 1992, economist Gary Solon began a long reassessment of the extent of economic mobility within the field of economics. Prior to his work, America's social policy community had become increasingly concerned about long-run divisions in the American population, but economic work on the subject suggested that American households were highly mobile, and that a father's income status had little impact on the eventual status of his children. Mr Solon questioned the statistical veracity of this work and conducted his own study, which suggested that the correlation between a father's earnings and his son's might be at least 0.4. A wave of empirical work since that time suggests that Mr Solon was, if anything, too optimistic. In 2006, economist Miles Corak surveyed the field's findings and concluded that around 50% of income variation in Britain and America was associated with income variation in the previous generation.

Now, new work is hinting that these studies, too, are overly sunny in their assessment of intergenerational mobility. This week's Free exchange column explains:

Mr Corak’s work draws on recent studies that compare income levels between just two generations: fathers and sons. That is out of necessity; good data covering three or more generations are scarce. But reliance on limited data could lead to overestimates of social mobility.

Gregory Clark, an economist at the University of California, Davis, notes that across a single generation some children of rich parents are bound to suffer random episodes of bad luck. Others will choose low-pay jobs for idiosyncratic reasons, like a wish to do charitable work. Such statistical noise makes society look more changeable than it is. Extrapolating the resulting mobility rates across many generations gives a misleadingly sunny view of long-term equality of opportunity. Mr Clark suggests that family history has large effects that persist for much greater spans of time. Fathers matter, but so do grandfathers and great-grandfathers. Indeed, it may take as long as 300-500 years for high- and low-status families to produce descendants with equal chances of being in various parts of the income spectrum.

Mr Clark confronts the lack of good data by gleaning information from rare surnames...Mr Clark reckons that even in famously mobile Sweden, some 70-80% of a family’s social status is transmitted from generation to generation across a span of centuries.

Mr Clark's work suggests not only that rates of mobility are much lower than previously estimated, but that they are relatively unchanging over time and across countries (with the exception of some highly class-bound countries like India, where rates are lower still). Other researchers are less sure of the continuity of rates across long time periods but nonetheless find mobility rates to be much lower than previously estimated:

Painstaking work by Jason Long of Wheaton College and Joseph Ferrie of Northwestern University provides another perspective. They have spent the past decade poring over census returns from America and Britain, identifying families with children in one count, tracking down the same children as adults in another, and thereby building up a multigenerational dataset. An analysis of three generations shows that in both America and Britain the effect of high (or low) incomes in one generation lasts for at least two more. Yet their study also suggests it is possible to break patterns of immobility. Although American and British mobility rates had converged by the middle of the 20th century, America’s social order was considerably more fluid than Britain’s in the 19th century. The past has a tight grip on the present. But in the right circumstances, it can apparently be loosened.

The challenge is in understanding what those right circumstances are and how they can be applied effectively. America in the late 19th century was a very unusual place. Public education was rapidly expanding even as the skill-demands of new industries were relatively modest. Rates of immigration were far higher than in the 20th century, and Americans were only beginning to settle their continent's massive expanse. Today, America's geography and economy are more rigid. Human capital is much more important, but also more expensive and time-consuming to obtain. What's more, as Mr Clark points out, assortative mating is on the rise; well-off, well-educated individuals are more likely than ever to marry each other. And rising inequality of incomes may lead to even greater magnification of low underlying rates of mobility.

The results are discouraging and important. To continue the discussion we will be posting comments on the column and the research on which it relies by experts in the field. Do contribute your own in the comments sections.