A copula-based framework for studying intergenerational income mobility

Abstract

This study extensively elucidates the methodological advantages inherent in a copula-based framework for researching intergenerational income mobility: (1) By delving into copula density, one can shift the focus from a single summary index (such as the rank-rank slope or intergenerational income elasticity) to more nuanced mobility patterns that exhibit less sensitivity to marginal income distribution specifications. (2) With consistent marginal cumulative distributions, the framework enables the examination of changes in bivariate intergenerational income dependence, or morphology. This is achieved by assessing variations in copula density before and after accounting for relevant covariates, with the Cramér–von Mises statistic providing a user-friendly test for the statistical significance of these variations. (3) The copula-based framework, through the construction of different cross profiles on the copula density surface, accommodates research objectives related to both relative and absolute income mobility. To exemplify the application of this framework, we investigate intergenerational income mobility between 1978 and 2017 using the National Longitudinal Survey of Youth 1979 (NLSY79).