Inequality of Opportunity, Income Mobility, and the Interpretation of Intergenerational Elasticities, Correlations, and Rank-Rank Slopes

Abstract

Although there is an extensive methodological literature on the measurement of intergenerational income mobility, there has been limited research on the conceptual interpretation of mobility measures and the methodological implications of those interpretations. In this article, I focus on the three measures of mobility most frequently used in the literature—the intergenerational elasticity (IGE), the intergenerational correlation (IGC), and the rank-rank slope (RRS)—as well as a recently introduced measure, the intergenerational elasticity of expected income (IGEE). I make two main contributions, both related to the conceptual interpretation of mobility measures. First, I specify the formal relationships between those four mobility measures and the measures of inequality of opportunity developed in the luck egalitarian empirical literature on the topic, and determine the methodological implications of the analyses. I show that (a) the IGC is a measure of relative inequality of opportunity for monetary income, (b) the RRS is both a measure of relative inequality of opportunity for income rank and a rescaled measure of absolute inequality of opportunity for income rank, and (c) the products of parental income inequality by the IGEE and IGE are both measures of absolute inequality of opportunity for monetary income that differ in how they measure the value of opportunity sets. Second, relying on a conceptual distinction that has been influential in the field of public finance, the IGE and IGEE have been characterized as “person-weighted” and “dollar-weighted” elasticities, respectively, thus raising doubts about the desirability of a recent proposal to replace the IGE by the IGEE as the workhorse elasticity of the mobility field. I show that this contrasting characterization of the two intergenerational elasticities is the joint result of a category mistake—equating quantile-specific elasticities to person-specific elasticities—and of misconstruing the nature of the IGE and the epistemic goal it has been meant to serve. Based on this analysis, I conclude that the case for replacing the IGE with the IGEE remains well-founded.