Inequality in Skills and the Great Gatsby Curve - Mobility is Lower in the USA than in Most Other Advanced Economies
November 13th, 2014
from the Chicago Fed
In recent years, concerns about inequality of opportunity have risen to the forefront of policy discussions in the United States. This is due in part to a growing body of evidence showing that intergenerational economic mobility is lower in the U.S. than in most other advanced economies. In the U.S. more than elsewhere, where you are in the income distribution reflects where your parents were in the previous generation.
What is it about the U.S. that makes it less economically mobile? One prominent hypothesis is that low mobility is related to the especially high level of inequality. Indeed, there appears to be a striking correlation between the levels of inequality across countries and rates of intergenerational mobility. In 2012, Alan Krueger, then the chair of the President’s Council of Economic Advisers, referred to this relationship as the “Great Gatsby curve” and warned that rising inequality could lead to reduced intergenerational mobility in the future.