Steven N. Durlauf (Department of Economics, University of Wisconsin, USA) ; Andros Kourtellos (Department of Economics, University of Cyprus, Cyprus; The Rimini Centre for Economic Analysis, Italy) ; Chih Ming Tan (Department of Economics, University of North Dakota, USA; The Rimini Centre for Economic Analysis, Italy)
In this paper, we explore nonlinearities in the intergenerational mobility process using threshold regression models. We uncover evidence of threshold effects in children’s outcomes based on parental education and cognitive and non-cognitive skills as well as their interaction with offspring characteristics. We interpret these thresholds as organizing dynastic earnings processes into “status traps”. Status traps, unlike poverty traps, are not absorbing states. Rather, they reduce the impact of favorable shocks for disadvantaged children and so inhibit upward mobility in ways not captured by linear models. Our evidence of status traps is based on three complementary datasets; i.e., the PSID, the NLSY, and US administrative data at the commuting zone level, which together suggest that the threshold-like mobility behavior we observe in the data is robust for a range of outcomes and contexts.
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