Begging the Question: Permanent Income and Social Mobility

Working Paper 075
Sean Muller
Publication date: 
September, 2007

The extent of social mobility is one of three key considerations - along with living standards and the level of inequality - in any assessment of a society’s economic merits. The intergenerational correlation (IGC) between the incomes of parents and their children provides a summary statistic of income mobility, where low income correlations reflect high mobility, whilst high correlations reflect low mobility. As such it has become the primary measure of this variable. The main alternative measure, in the form of mobility matrices, is unable to provide a single measure of mobility but has the advantage of capturing variation in mobility across different parts of the income distribution.

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