The Geography of Family Differences and Intergenerational Mobility

The Geography of Family Differences and Intergenerational Mobility

1. Introduction The United States is an incredibly diverse country consisting of a large number of places with distinctive physical characteristics,varied populations, and different economic circumstances. A recent, ground breaking study by Chetty et al. (2014) has added to this list of differences. In this study, Chetty et al. (2014) document previously unknown, largegeographical differences in intergenerational income mobility. For example, Chetty et al. (2014) reported that the income of a 30-year-old person from a low-income family who grew up in Cook County, IL (Chicago) is nearly 30% ($7,420) lower than for a person of the same age from a similarly low-income family who grew up in DuPage County, a mere 20 miles west. The present value of this future income difference is substantial—$167,000—assuming 40 years of working life and a three percent discount rate. The large geographic differences in intergenerational income mobility documented by Chetty et al. (2014) are important because they raise the possibility, arguably in a more compelling way than in any previous research, that places, independently of the people that live there, matter in determining economic wellbeing. It is likely, that the findings reported in Chetty et al. (2014) will become one of the key facts in the “people versus place” debate in economic development (Kain and Persky 1969; Bartik 1991; Galster and Killen 1995; Bartik 2003; Kline and Moretti 2014). While the Chetty et al. (2014) study is innovative, it remains a descriptive analysis. The place differences documented in Chetty et al. (2014) are not causal estimates and are potentially confounded by differences between the families that live in these places. Chetty et al. (2014) were aware of the potential confounding issue:“...[O]ur descriptive analysis does not shed light on whether the differences in outcomes acrossareas are due to the causal effect of neighborhoods or differences in the characteristics of peopleliving in those neighborhoods.” (Chetty et al. 2014, p.1559)However, Chetty et al. (2014) did not investigate in a meaningful way the extent of the possible confounding by differences in family characteristics most likely because of the use of income tax records that have little information about family characteristics.

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"Within any county or commuting zone there is often wide variation in school quality, public safety and other potential influences of child development and future success. Therefore, finding that intergenerational income mobility differs by commuting zone or county should be viewed skeptically from a causal perspective because the premises and plausibility of the investigation were not well established."

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