A More Complete Look at Inequality and Immobility

January 18th, 2012 at 1:42 pm

Miles Corak has for years been making important contributions to the relationship between inequality and mobility.  His data generated the figure in a recent presentation of the issues by White House economist Alan Krueger, featured here.

Corak posts a more recent version of the graph with more countries.  Recall that the graph shows the relationship between inequality in these economies (x-axis) and lack of mobility (y-axis—the “intergenerational earnings elasticity” is a measure of correlation between the income of grown children and their parents—higher values suggest less mobility).

First of all, note that in the Krueger chart, the US scores among the highest on the combination of the two variables, but that’s because that sample is limited to only “advanced” economies—a legitimate comparison, btw, as these economies are the most similar.

But here you see how we exist at the borderline between advanced and emerging.  The question then becomes, which way do we go—up the line toward South Africa or down the line toward Denmark?

My fear is that until we deal with the underlying structural factors driving inequality ever higher (outside of recessions), it’s the former.

*Note: Scott Winship of the Brookings Institution has raised questions about these data and relationships that Corak addresses (and debunks) on his website (which is a treasure-trove of top quality info on these issues).

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6 comments in reply to "A More Complete Look at Inequality and Immobility"

  1. Jean says:

    I find it interesting when looking at most of these charts that the Republicans could decry the idea of being more like Europe, when the alternative is to be more like a developing nation.

    Currently our closest neighbor on this chart is Singapore. Is that the vision they have in mind?

    As long as we have the current political climate, it will be our current momentum that will carry us along, since nothing is going to be resolved in the near future. Where were we on this chart over the course of time? Has that changed? Where is our current momentum taking us?

    My guess is we are currently moving to the upper right hand corner of this chart. In any case, the real question for me is, how can we effect change given the current political situation.


  2. Fred Donaldson says:

    Some of the nations we are egual to in inequality are more equal because the lowest rung starts with free healthcare and low-cost college education, etc.

    http://www.safrica.info/about/health/health.htm

    So, it’s really worse than it looks.


  3. Tom in MN says:

    The statement “the US has among the highest correlations” is not what you mean. You mean that the US has the highest values of the two variables for developed nations. A single data point (the US) does not have a correlation, it’s only when you put all the counties together that the correlation between the two variables emerges.

    Another way of saying what you point out is that the goal is to “get down to the left” on this plot. Which we already knew anyways ;)


  4. James Edwards says:

    I would love to see where India is on that chart. I think that, though we often compare the US and China, India is actually the country trying to be most like us. It’s a democracy with a much more diverse economy than China. I would also expect it to be very close to where the US currently is.

    Another thing that would be very interesting is to add arrows showing weighted average velocities. Where is everyone on the chart going?

    Final point. We have inequality now in the national spotlight. Now what? Many people are going to ask what’s wrong with inequality? Other than a general sense of unfairness, what’s the economic problem? Do we allow our economy to shift to one which provides goods and services for a haves versus have nots society? Or do we change the momentum back to a middle class society and let the current economy regain momentum? Which is better? Does it matter?

    We have the nations attention on this, now what is it we wanted to say?


  5. Jack M says:

    Question on the GINI data and graph: High “equality” and high mobility in (e.g.) Denmark; How is mobility range accounted for against low range of inequality. That is, if there is not great variance in socio-econ strata, then “mobility” must necessarily be more limited. That is, not as much difference between bottom quint and top quint, in Denmark, v. US. How is this fundamental difference in “absolute” distance accounted for?

    Thanks for clarifying, if you’re able. Love your work. THANKS GREATLY.


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