Rising inequality, declining mobility: The evolution of intergenerational mobility in Germany
Abstract
This paper is the first to systematically show that intergenerational income mobility in Germany has decreased over time. We estimate intergenerational persistence for the birth cohorts 1968–1987 and find that it rises sharply for cohorts born in the late 1970s and early 1980s, after which it stabilizes at a higher level. As a step toward understanding the mechanisms behind this increase, we show that parental income has become more important for the educational outcomes of children. Moreover, we show that the increase in intergenerational persistence has coincided with a surge in cross-sectional income inequality, providing novel evidence for an “Intertemporal Great Gatsby Curve”.