The Business Insider highlights research by Miles Corak on the “Gatsby Curve.”
Excerpt:
The following chart shows the Great Gatsby Curve. The vertical axis shows the intergenerational elasticities compiled by Corak using previous research papers that focus on intergenerational mobility in different countries. A lower intergenerational elasticity means that there is higher income mobility in that country because there is a weaker relationship children and their parents’ incomes. The details are explained below the chart:
The Great Gatsby Curve shows that in countries where income inequality is low, someone born in the bottom economic class may have a good chance to move up to a better economic situation than their parents. Alternatively, in countries where income inequality is high, a child in a low-income family may have a harder chance of climbing the economic ladder. The US falls somewhere in the middle.
…The concept is based on previous research by economist Miles Corak and others who examined the relationship between a country’s inequality and its income elasticity. Corak used the Gini coefficient, a standard measure of a country’s income inequality. The coefficient ranges from 0 to 1, where a score of 0 means complete equality and a score of 1 means the country has complete inequality.
In Corak’s research, income elasticities were based on father’s and son’s earnings for sons born in the 1960s. The elasticity measure indicates how much of a child’s income is dependent on their parents. An elasticity of 1 means where a child ends up in the income distribution is completely dependent on the parents’ financial circumstances, and so it would be very hard for a child to move upward or downward the economic ladder.
Although there is no clear solution to the issue of unequal opportunity between countries, The Organisation for Economic Co-operation and Developmentpresented in its recent social mobility report different policies that could help close the gap between disparities in intergenerational upward income mobility. Some of the suggested policies include apprenticeships and educational outreach to help low-income children have better opportunities for their future employment.
Read the entire article, Here’s Where the US Falls on the ‘Great Gatsby Curve,’ by Madison Hoff.