Where Children Grow Up Affects How Much They'll Earn
On average, a child who moved from downtown Chicago to the city's western suburbs at birth would earn almost 30 percent more than one who grew up downtown.
Parents move their families for job opportunities, bigger houses, and better schools. Those who believe that where their children are raised will affect their future earnings are right. That's what Raj Chetty and Nathaniel Hendren find in The Impacts of Neighborhoods on Intergenerational Mobility II: County-Level Estimates (NBER Working Paper No. 23002).
When Glory Is Something to Die For
Using data on the variation in the age of children when families move, the researchers estimate how growing up in each of 3,000 U.S. counties affects a child's earnings at age 26. For instance, they find that children who moved from Manhattan to Queens at younger ages have higher earnings. After ruling out other potential explanations such as residential sorting, they argue that this suggests Queens has a positive impact on future earnings. They find that, for children whose parents are at the 25th percentile of the national income distribution, each additional year of childhood spent in a county that is one standard deviation (SD) "better" than the average county increases mean annual earnings at age 26 by 0.5 percent, or $135. If a child lives in a one-SD-better county for 20 years, they predict annual income would be, on average, 10 percent higher at age 26. Likewise, children at the 75th percentile of the parental income distribution would see an increase of 0.3 percent of their mean earnings, or $130, for each additional year spent in a one-SD-better county.
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