The Politics of Income Mobility

To think about the determinants of intergenerational income mobility we develop a formal model that incorporates the role of public and private spending on education and the calcification (and hence heritability) of the labor market. Our model examines how institutional level outcomes such as the tax rate and labor market calcification affect individual choices about private investment in the human capital of children, as well as examining how calcification (our most obviously `exogenous' parameter) affects citizens' preferred tax rates. We conclude by demonstrating the existence of various equilibria in intergenerational income mobility, as determined by labor market calcification and the prevailing level of investment in public education. The model's predictions are tested using panel data spanning several decades and detailed geo-coded census data and subnational policy data in the USA.