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Title: Decomposing Economic Mobility Transition Matrices
Resulting in 1 citation.
1. Richey, Jeremiah Alexander
Rosburg, Alicia
Decomposing Economic Mobility Transition Matrices
Journal of Applied Econometrics 33,1 (January/February 2018): 91-108.
Cohort(s): NLSY79
Publisher: Wiley Online
Keyword(s): Family Income; Geocoded Data; Income Distribution; Intergenerational Patterns/Transmission; Mobility, Economic; Parental Influences

Permission to reprint the abstract has not been received from the publisher.

We present a decomposition method for transition matrices to identify forces driving the persistence of economic status across generations. The method decomposes differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households (a composition effect) and portions attributable to differing returns to these characteristics (a structure effect). A detailed decomposition based on copula theory further decomposes the composition effect into portions attributable to specific characteristics and their interactions. To examine potential drivers of economic persistence in the USA, we apply the method to white males from the 1979 US National Longitudinal Survey of Youth. Depending on the transition matrix entry of interest, differing characteristics between sons from different households explain between 40% and 70% of observed income persistence, with differing returns for these characteristics explaining the remaining gap. Further, detailed decompositions reveal significant heterogeneity in the role played by specific characteristics (e.g., education) across the income distribution.
Bibliography Citation
Richey, Jeremiah Alexander and Alicia Rosburg. "Decomposing Economic Mobility Transition Matrices." Journal of Applied Econometrics 33,1 (January/February 2018): 91-108.