Examining the Relationship Between Intergenerational Upward Mobility and Inequality: Evidence from Panel Data

The relationship between intergenerational mobility and inequality is widely explored but yet to reach conclusive results. The convention is to provide descriptive analysis with data of several developed countries, termed as the Great Gatsby Curve (GGC). This paper constructs a panel data containing a wide range of modern societies to replicate and extend the GGC with alternative measures. Through investigations, this study confirms that inequality skews the intergenerational upward mobility. Ceteris paribus, every one percent increase in inequality measured by top 10% income share will decrease the upward mobility by about 5 percent on average. On the other hand, every one percent increase in the bottom 50% income share contributes to 12 percent increase in the upward mobility. In comparison, it implies that it is not only the degree but also the structure of the inequality, that matters for the intergenerational mobility. The increase in the income share held by the bottom earners prompts the overall upward mobility with much greater and more meaningful magnitude. Besides, economic development benefits to the overall upward mobility.