Intergenerational earnings mobility and the inheritance of employers

Miles Corak 1, Patrizio Piraino1
1University of Ottawa, Canada, 2Statistics Canada, Canada

We use a large administrative data base on a cohort of young Canadian men to document and explain the degree to which their adult earnings are related to the earnings of their fathers taking into account that employers may be transmitted across the generations. Our analysis of intergenerational earnings mobility modifies the Becker-Tomes model to incorporate the intergenerational transmission of employers, which is predicted to increase the intergenerational elasticity of earnings. In our data about 6% of young men have the same main employer as their fathers, but this is positively related to paternal earnings and rises discretely at the top of the distribution. We use a switching regression model and identify two regimes associated with the inheritance of employers that have different intergenerational earnings elasticities. The model also demonstrates that the inheritance of employers plays a role in understanding observed nonlinearities.

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