The effect of parental background along the sons’ earnings distribution: does one pattern fit for all?

ABSTRACT

This article sheds light on the differences in the mechanisms generating intergenerational inequality in the four largest Euro Area economies (Spain, Italy, Germany and France) looking at the association between parental background and sons’ earnings along the sons’ distribution. We find that in all countries returns to parental background increase along the sons’ earnings distribution and the probability of ending up in high deciles is significantly correlated with parental background. However, although these findings lend support to the existence of a common mechanism, substantial differences in returns’ steepness question the one-pattern-fits-all story.

KEYWORDS:

• Intergenerational inequality
• international comparison
• unconditional quantile regressions
• social mobility

JEL CODES:

• J31
• J62
• D31
• C21

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ According to the literature (e.g. Granovetter 1995), parental occupation is a good proxy for the influence of the family on son’s outcomes as it encompasses unobservable aspects of human capital, socio-economic status and family networks.

² The other characteristics included to build the rank are dummies for fathers born in the country, for mothers born in the country and for households where both parents were present, the number of siblings (sorted in descending order), the number of income recipients in the household, the year of birth of the father and the mother (sorted in descending order).

³ The influence of outliers is reduced by dropping the bottom 1% and the top 0.5% of the country distribution of annual gross earnings. Note that hourly wages are not collected in EU-SILC, while monthly wages are not recorded in Germany.

⁴ To the best of our knowledge, only two studies have investigated intergenerational mobility using UQR: Schnitzlein (2014), who compares Germany and the US, and Gregg, Macmillan, and Vittori (2015), which focuses on the UK. Both studies find an increasing pattern of the intergenerational income elasticity along the children income distribution.

⁵ The estimated patterns do not change if we use dummies for the various deciles.

⁶ Note that the J-shaped pattern in Italy (due to the high value of the estimated coefficient in the first decile) disappears when we exclude the self-employed from the analysis.