Intergenerational Effects of the Distribution of Income and Wealth: The Utah Experience, 1850-1900
J. R. Kearl, Clayne L. Pope
NBER Working Paper No. 754
The relationship between the wealth or income of parents and children is an important economic issue in both positive and normative senses. In this paper, we estimate elasticities of sons' income or wealth with respect to the wealth of their fathers for a sample of households in nineteenth century Utah. We find the elasticity relating the wealth of fathers to sons to range from .10 to .34 depending on the variables held constant such as occupation, age and residence. Elasticities based on observation of the wealth of fathers and sons in the same year were higher than those based on a lagged value of the fathers' wealth. The death of the father prior to observation of the sons' wealth increased the elasticity about three fold. The elasticity between the income of sons and wealth of fathers was low (.09 to .21) but significant even though the sons' incomes were observed fifteen years after the wealth of fathers. In general, the data suggest a persistent relationship between the economic status of parents and their children with substantial regression toward the mean so that an economic elite was unlikely to be based upon intergenerational transmission of economic success.