USA 1962–2014: Absolute mobility decreases with income; individuals & families occupying the income distribution lower ranks have a higher probability of increasing income over short time periods

Growth, Inequality and Absolute Mobility in the United States,1962–2014. Yonatan Berman. https://www.dropbox.com/s/h6r650313zwqe7d/mobility_recov2.pdf

Abstract: This paper combines historical cross-sectional and longitudinal data in the US to study patterns of economic growth within the income distribution. We quantify absolute mobility as the fraction of families with higher income over a period of several years. The rates of absolute mobility over periods of two to four years are procyclical and are largely confined within 45%–55%. We also find that absolute mobility decreases with income. Individuals and families occupying the lower ranks of the income distribution have a higher probability of increasing their income over short time periods than those occupying higher ranks. This also occurs during periods of increasing inequality. Our findings stem from the importance of the changes in the composition of income percentiles. These changes are over and above mechanical labor market dynamics and life cycle effects. We offer a simplified model to mathematically describe these findings.

Keywords:Social mobility, inequality, growth, labor market dynamics

JEL Codes:D3, E2, H0, J6