Thursday, February 16, 2012

Country Size, Industry Specialization And Religion Affect Income Mobility And Income Inequality As Much As Other Factors

Country size, industry specialization within a country, and religious subgroups as much as any other factors, such as poverty and education, could lead to higher income inequality, less income mobility and higher inter-generational affects of rich and poor families.

From The National Review Online, "The Great Gatsby, Moby Dick, and Omitted Variable Bias" by Jim Manzi:
[Alan] Krueger [President Obama’s economic adviser] posits a causal mechanism of wealthy parents increasingly giving their kids an edge through superior education. There is almost certainly some truth to this. He implies that are there other causal mechanisms by which inequality today can cause less social mobility in the future. But what about all the other potential reasons, beyond what their Gini Coefficient [statistical inequality measure used by academics] was in 1985, for varying levels of social mobility between countries as diverse as Japan, France, and New Zealand?

The most obvious example is just the size of the countries. It’s at least plausible that much bigger countries contain more variety. In fact, if you ... use the population of each country as the X-axis, you get a very strong a statistical relationship (log-linear R2 = .64). Big countries have higher IGE [Intergenerational Earnings Elasticity, the degree to which your parents' earnings determine your earnings]....

Alternatively, we might see that some countries tend to specialize more than others. As a practical example, part of the reason that a country like Finland can have so much equality and social mobility versus America might be that many more of the relatively poorer farmers who trade food for Finnish mobile phones live and reproduce in other countries. If so, then we might see that if we replace the X-axis with exports as a % of GDP, there could be another statistically significant relationship with IGE. Check (R2 = .48).

Alternatively, different countries might be more or less populated by heterogeneous subgroups that are more likely to reproduce for non-economic reasons with others within their own group. Religious fractionalization versus IGE? Check (R2 = .57).

No comments:

Post a Comment