the Economic Report of the President, issued by President Obama’s Council of Economic Advisers earlier this year.
(Income inequality increases to the right while social mobility decreases as one moves up).
Raj Chetty & Nathaniel Hendren (Harvard) have partnered with Patrick Kline and Emmanuel Saez (Berkeley) to found the Equality of Opportunity Project. They have used micro data to study (among other things) the impact of geography on income mobility within the US. The best description I have found of their result is a NYT article by David Leonhardt. Here is a selection of the most informative parts of this article (but look at the original article which is supplemented by several interactive maps):
The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas. These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas.
Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota.
“Where you grow up matters,” said Nathaniel Hendren, a Harvard economist and one of the study’s authors. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”
That variation does not stem simply from the fact that some areas have higher average incomes: upward mobility rates, Mr. Hendren added, often differ sharply in areas where average income is similar, like Atlanta and Seattle.
The gaps can be stark. On average, fairly poor children in Seattle — those who grew up in the 25th percentile of the national income distribution — do as well financially when they grow up as middle-class children — those who grew up at the 50th percentile — from Atlanta.
Geography mattered much less for well-off children than for middle-class and poor children, according to the results. In an economic echo of Tolstoy’s line about happy families being alike, the chances that affluent children grow up to be affluent are broadly similar across metropolitan areas.
The team of researchers initially analyzed an enormous database of earnings records to study tax policy, hypothesizing that different local and state tax breaks might affect intergenerational mobility.
What they found surprised them, said Raj Chetty, one of the authors and the most recent winner of the John Bates Clark Medal, which the American Economic Association awards to the country’s best academic economist under the age of 40. The researchers concluded that larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly. The economists also found only modest or no correlation between mobility and the number of local colleges and their tuition rates or between mobility and the amount of extreme wealth in a region.
But the researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.
Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.
Regions with larger black populations had lower upward-mobility rates. But the researchers’ analysis suggested that this was not primarily because of their race. Both white and black residents of Atlanta have low upward mobility, for instance.
The authors emphasize that their data allowed them to identify only correlation, not causation. Other economists said that future studies will be important for sorting through the patterns in this new data.
In previous studies of mobility, economists have found that a smaller percentage of people escape childhood poverty in the United States than in several other rich countries, including Canada, Australia, France, Germany and Japan. The latest study is consistent with those findings.
Whatever the reasons, affluent children often remain so: one of every three 30-year-olds who grew up in the top 1 percent of the income distribution was already making at least $100,000 in family income, according to the new study. Among adults who grew up in the bottom half of the income distribution, only one out of 25 had family income of at least $100,000 by age 30.
Yet the parts of this country with the highest mobility rates — like Pittsburgh, Seattle and Salt Lake City — have rates roughly as high as those in Denmark and Norway, two countries at the top of the international mobility rankings. In areas like Atlanta and Memphis, by comparison, upward mobility appears to be substantially lower than in any other rich country, Mr. Chetty said.
Especially intriguing is the fact that children who moved at a young age from a low-mobility area to a high-mobility area did almost as well as those who spent their entire childhoods in a higher-mobility area. But children who moved as teenagers did less well.
That pattern makes economists more confident that the characteristics of different regions — as opposed to something inherent and unchangeable in the local residents — are helping cause the varying mobility rates.
