Determinants of Inequality and Economic Opportunity Using Administrative Databases from Israel
2017 CSS Fellowship
In collaboration with Tom Zohar.
Equality of opportunities is a topic of widespread interest, central to both academic and political discussions. Economic studies have traditionally estimated the intergenerational elasticity (IGE) in income. However, income based measures can greatly underestimate the intergenerational persistence of opportunities. Individuals from wealthy families often pursue careers which do not necessarily maximize their earnings (e.g. teachers, artists and academics), while those from less advantageous backgrounds might not have this choice. Therefore, ignoring the non-monetary component of jobs is misleading. This projects aims to bridge this gap. For this purpose, we build on a recent innovation proposed in Sorkin (2017), in which a revealed preference method is used to estimate the total value of each job, including both monetary (wage) and non-monetary (amenities) components. Combined with linked parent-child data on labor market outcomes, it allows us to estimate the intergenerational persistence of utility, i.e. the degree to which family background determines one’s wellbeing.