Template-Type: ReDIF-Paper 1.0
Author-Name: Paul Bingley 
Author-X-Name-First: Paul 
Author-X-Name-Last: Bingley
Author-Email: pbingley@sfi.dk
Author-Workplace-Name: SFI, The Danish National Centre for Social Research
Author-Name: Lorenzo Cappellari 
Author-X-Name-First: Lorenzo 
Author-X-Name-Last: Cappellari
Author-Email: lorenzo.cappellari@unicatt.it
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore
Title: Correlation of Brothers Earnings and Intergenerational Transmission
Abstract: We model the correlations of brothers’ earnings isolating the effect of fathers’ earnings from additional residual influences shared between brothers. We separate the two effects by analysing sibling correlations and intergenerational correlations jointly within a unified framework. Our multi-person model of earnings dynamics distinguishes permanent from transitory shocks, allows for heterogeneous life cycle effects and nests previous models. Using data on the Danish population of father/first-son/second-son triplets, we corroborate the findings of studies that do not account for life cycle effects for those aged in their 30’s, but find correlations twice as large at 25. The impact of intergenerational effects also varies over age, but is everywhere higher than found in previous studies  ?by on average a factor of thirteen? and accounts for most of the sibling correlation. We provide evidence that lack of both life cycle effects and heterogeneous intergenerational transmission across families in previous studies explain the difference. When allowing for differential intergenerational transmission within families, we find mild evidence of stronger transmission to second sons.
Length: 47
Creation-Date: 2013-11
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def0006.pdf
File-Format: Application/pdf
File-Function: First version, 2013
Number: def0006
Classification-JEL: D31 J62
Keywords: Sibling correlation, Intergenerational transmission, Life cycle earnings
Handle: RePEc:ctc:serie1:def0006