Joint with Ignasi Merediz-Solà (IFS and UCL) and Alexandros Theloudis (Tilburg University).

Abstract:

This paper studies how parental income and childhood location shape inequality in lifetime earnings. We develop and estimate a semi-parametric life-cycle model of earnings, employment, and geographic mobility with unobserved worker types, location types, and worker–location match effects. The model incorporates parental income and childhood location into initial conditions and life-cycle profiles, and allows migration to be endogenous. Using matched parent-child data from the Panel Study of Income Dynamics, we quantify how workers, local labor markets, and their matches contribute to earnings gaps. Children from higher-income families earn more over the life cycle, work full-time more often, sort more positively across locations, and are less likely to move toward lower-return places. Counterfactual simulations show that worker wage heterogeneity is the main source of the parental-income gap in lifetime earnings, while migration and worker–place complementarities are important equalizing forces.

for information giovanna.tramontano@unibocconi.it