Family Background, Education, and Income Mobility: A Closer Look at the American Dream

Open Access
Author:
Hayes, Duncan Wistar
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Russell Wade Cooper, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
Keywords:
  • Family Background
  • Education
  • Income Mobility
  • American Dream
  • Intergenerational Income Mobility
Abstract:
How much of a person’s income is determined by their parents? How do the education levels of the parents and children affect this relationship? What other variables are involved in the transmission of education and income across generations? These are the fundamental question that this paper seeks to address. After a literature review that goes over some of the most prominent work in this field, two models are created using data from the Panel Study of Income Dynamics. Model 1 finds the elasticity of children’s income with respect to parents’ income to be between 0.13 and 0.38, which is at the lower end of what many of the academic studies in this field find. Model 2, which includes only males, finds the elasticity of sons’ income with respect to dads’ income to be around 0.30, with some regions as high as 0.45. Overall, the data shows clearly that there is a link between the incomes of parents and the incomes of their children, and that education plays a major role in this link as well.