Unlocking the American dream: Exploring intergenerational social mobility and the persistence of economic status in the United States

The United States has long been thought of as the "land of opportunity," where economic success is within reach for anyone who is willing to work hard. Recent research, however, into the transmission of economic status across generations has challenged this perception, showing that a substantial portion of any individual's long-run earnings can be explained by the relative socio-economic status of their parents. This paper explores this relationship in greater depth, looking specifically at some of the contributing factors to economic mobility and whether the relative importance of these factors differs at different levels of income. I use forty years of data from the Panel Survey of Income Dynamics (PSID) to measure the persistence of economic status across generations and the role that education, race, religious preference, and parent's labor force participation play in affecting economic mobility. In addition to measuring economic mobility at the mean, this paper also uses quantile regression to see how the intergenerational correlation of income and its causes vary across the income distribution. Consistent with previous research, I find that the intergenerational earnings correlation is strongest at the bottom of the son's earnings distribution, and gets weaker at higher levels of earnings. In contrast to previous research, however, I find that the effect of education in improving children's long-run earning may have become larger for the wealthy than for the poor or middle class. I also identify significant effects for race and religion in the transmission of economic status, and a possible negative relationship between fathers' extended hours at work and their sons' eventual long-run earnings.