Edward Conard

Top Ten New York Times Bestselling Author

  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
Upside of Inequality Oxford Unintended Consequences

AI Summary. Americans are more likely than people in peer countries to surpass their parents' income in absolute terms, but the US is not an outlier in relative earnings mobility, or movement beyond a parent's rank in the income distribution. Because US inequality is higher, absolute gaps between children shrink less by adulthood than elsewhere.

Scott Winship Archbridge Institute
Date Posted:
Is Database:
Database

Americans have a higher likelihood of surpassing their parents’ income, yet they face challenges in moving beyond their parents’ income distribution rank.

How does US economic mobility compare with peer countries?

Core argument: Americans are more likely to surpass their parents' income, yet face greater difficulty moving beyond their parents' rank in the income distribution.

Americans have a higher likelihood of surpassing their parents' income, yet they face challenges in moving beyond their parents' income distribution rank. The US is not an outlier in relative earnings mobility compared to international counterparts, but absolute mobility patterns reduce childhood inequalities less than in other countries. This is due to higher levels and growth of inequality in the US, where absolute inequalities between children diminish less by adulthood. Relative mobility measures align more closely with conceptions of opportunity, and as research methods improve, cross-national differences may appear smaller.

Takeaways by Macro Roundup® AI

  1. Americans are more likely to surpass their parents' income, yet face greater difficulty moving beyond their parents' rank in the income distribution.
  2. The US is not an outlier in relative earnings mobility compared with other countries, but its absolute mobility patterns reduce childhood inequalities less, as absolute gaps between children diminish less by adulthood amid higher levels and growth of inequality.
  3. Relative mobility measures align more closely with conceptions of opportunity, and as research methods improve, cross-national differences in mobility may appear smaller.

new Winship note looks at cross country mobility finds that there no basis for strong assertions that relative earnings mobility is higher outside the US US mobility is in line with our international comps. Americans have a greater chance of exceeding their parents’ income than the usual suspects (Chetty et al.) suggest, but they have a lower chance of transcending their parents’ rank in the income distribution

"....Focusing on earnings, the US is not an outlier in terms of relative mobility, even if absolute mobility patterns tend to reduce childhood inequalities less here than in other countries (as indicated by IGEs).* This is an important distinction, because commentators and researchers often claim to be concerned about relative mobility—transcending initial position or rank— even as they point to IGEs, which summarize absolute mobility patterns. IGEs look higher, and so “mobility” lower, when grown children have more contemporary inequality versus the cross-sectional inequality their parents experienced. But the fact that the income gap between the upper middle class and the poor has grown says nothing about whether it has become harder for a poor child to become an upper-middle-class adult....relative mobility measures accord better with most conceptions of opportunity than do absolute mobility measures (including the IGE). (Relative mobility measures also have practical advantages over absolute mobility measures, as discussed in that section.).... The evidence indicates the US holds its own when it comes to relative earnings mobility, whether looking at sons or daughters. It also tells us that when parental family income is the basis for assessing mobility, relative mobility looks lower in the US than elsewhere. And, reflecting the higher levels and growth of inequality in the US, absolute inequalities between children tend to diminish less in the US by adulthood than they do in other countries, whether looking at earnings or family income. As the relative mobility literature continues to grow more sophisticated, it would not be surprising to see more studies using parental income that find smaller cross-national differences, following the trajectory of the relative earnings mobility research. And even research estimating IGEs is likely to continue finding higher elasticities than the less-methodologically sound studies of the past, as has happened in the US as methods have improved....."

Scott Winship, "Economic Mobility in American A State of the Art Primer Part 2: The United States in Comparative Perspective," Archbridge Institute, December 2018, https://www.archbridgeinstitute.org/wp-content/uploads/2018/12/Archbridge-Economic-Mobility-primer-part2-US-in-perspective.pdf

*international elasticity

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