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Measurement and Cross-Country Differences

This exercise highlights that sons of fathers from

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Unformatted text preview: te, suggesting that they are more mobile than the average. China also stands out in the results for daughters.10 The opposite is the case for sons with fathers born in Greece. Though these observations stand out in figure 3, it should once 10 The relative shares of these countries in the entire population also determines the extent of the change in the estimated elasticity. For example, as appendix table 1 illustrates, the United Kingdom has the second-highest number of children in the data and therefore carries a relatively large weight in the weighted regressions. Fortin – Econ 560 Lecture 5B In an ambitious study using population tax data covering all tax filers in the U.S. from 1996-2011, Chetty, Hendren, Kline and Saez (2013) measure intergenerational mobility at the local (census commuting zone) level based on the correlation between parents’ and children’s earnings (focusing on all children who were born in 1980 or 1981) To study the effects of tax expenditures on the social mobility using spatial variation in tax expenditures across the United States, they estimates the following regression: =+ + + (1) for each CZi, where IGEi is the parent rank-child rank correlation using within-CZ income centile ranks, EXPENDi is the measure of tax expenditures, and Xi is a vector of CZ characteristic controls including CZ median income and percentage of the population that is a 4-year-college graduate, white, black, Hispanic and other. They show that the level of local tax expenditures (as a percentage of AGI) is positively correlated with intergenerational mobility, a correlation that is robust to introducing controls for local area characteristics o An increase of overall tax expenditures by 1% of AGI in a CZ decreases the parent-child income correlation by .5 percentage points, relative to the mean correlation of 0.33. Source: Chetty, Henren, Kline and Saez (2013) FIGURE 2 Progressivity of Tax Expenditures (% Tax Expenditures/AGI, for Lowest - Highest AGI Class) Notes: This figure maps CZ difference in mean tax expenditures as a percentage of average Adjusted Gross Income (AGI) for individuals with less than $10,000 AGI and individuals with over $200,000 AGI. Darker areas represent more progressive tax expenditures. Data are from the IRS Statistics of Income ZIP Code Individual...
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