Posts Tagged ‘newspapers’

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This week, we taught The Great Gatsby and the so-called Great Gatsby curve in our course, A Tale of Two Depressions.

The next day, Raj Chetty et al. went public with their own study of income mobility. The corresponding newspaper headline was “Upward Mobility Has Not Declined.”

And that was a bit of a surprise, since the original Great Gatsby curve studies had found a positive relationship (across countries) between income inequality and income immobility. Clearly, inequality has increased in the United States since the mid-1980s but income mobility hasn’t much changed.

For example, the probability that a child reaches the top fifth of the income distribution given parents in the bottom fifth of the income distribution is 8.4% for children born in 1971, compared with 9.0% for those born in 1986. Children born to the highest-income families in 1984 were 74.5 percentage points more likely to attend college than those from the lowest-income families. The corresponding gap for children born in 1993 is 69.2 percentage points, suggesting that if anything intergenerational mobility may have increased slightly in recent cohorts.

However, what the study does reveal—which is missing from the headline accounts of the study—is that (a) income inequality did in fact increase over time in the sample (which means the consequences of the “birth lottery” are larger today than in the past) and (b) the major source of inequality over the course of the past three decades is the growing gap between the top 1 percent and everyone else (which is not, in fact, correlated with intergenerational immobility among quintiles).

And so, unless and until things change, we remain pretty much where F. Scott Fitzgerald left us back in 1925: falling further and further behind the “careless people,” who

smashed up things and creatures and then retreated back into their money or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made. . . .

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