TITLE:
Inequality and Mobility: Gatsby in the Americas
AUTHORS:
Sumaya Ali Brahim, Darryl McLeod
KEYWORDS:
Intergenerational Mobility, Education, Inequality, Conditional Cash Transfers, Skill Premium
JOURNAL NAME:
Modern Economy,
Vol.7 No.5,
May
27,
2016
ABSTRACT: We present evidence
that the recent fall Latin America inequality has been associated with higher
social mobility across countries and over time. This correlation refers to what
Alan Krueger and his CEA staff labeled the Great Gatsby Curve, but this is one
of the first papers to test the Gatsby correlation over time. Our search for
Gatsby curve correlates starts with classic mobility models where high Mincer
coefficients and skilled wage-premia enhance wealthier parents’ ability to impart
advantage to their children. We also refer to Gary Solon and others’ updates of
their model to emphasize the potential of social policy to assist low-income
children. Using Andersen’s education mobility measure for teens over a panel of
sixteen Latin American economies we test the robustness and correlates of
mobility and inequality. We find higher social expenditure, access to credit
and particularly conditional cash transfers increase mobility as do falling
skill-premia and lower returns to female education. More important, Latin
American social policy designed to reduce poverty and inequality in the short
run also increased education enrollments and therefore social mobility over the
longer term. Hence we find falling inequality is associated with rising social mobility
over twenty plus years and across sixteen Latin American countries, as the Great
Gatsby curve suggests.
