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How do education, skills, investments of parental time and school quality, and family circumstances during childhood contribute to the persistence of earnings across generations? Building on a classic literature in sociology and a more recent literature in economics, our model allows each of the above variables to affect lifetime earnings directly, as well as through their contribution to human capital formation. The model allows us to decompose the intergenerational elasticity of earnings (IGE) into its drivers. Using data from a representative British cohort followed from birth to age 55, we show the above variables explain most of the IGE. A key driver is the increased levels of parental investments received by children of high income parents early in their lives, and the resulting cognitive development.
Authors

Research Fellow University of Bristol
Uta is an IFS Research Fellow and University of Bristol lecturer with an interest in the development of inequalities over the lifecycle.

CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.

Research Scholar University College London

Research Associate Yale University
Cormac is a Research Associate of the IFS, an Assistant Professor of Economics at the Yale University and Research Fellow at the NBER.
Working Paper details
- DOI
- 10.1920/wp/ifs.2024.2524
- Publisher
- Institute for Fiscal Studies
Suggested citation
Bolt, U et al. (2024). The intergenerational elasticity of earnings: Exploring the mechanisms . 24/25. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/intergenerational-elasticity-earnings-exploring-mechanisms-0 (accessed: 9 February 2025).
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