Abstract

Low social mobility is a concern from an equity perspective because it may be indicative of unequal opportunities, as well as from an efficiency perspective if it hampers children from disadvantaged backgrounds to unfold their full economic potentials in later life. This paper investigates the intergenerational elasticity (IGE) of income and compares it with educational mobility for cohorts of children born between 1978 and 1990 in Chile and Peru. Our findings suggest that educational mobility has increased for younger generations mainly because of a structural expansion of education that created room at the top; when looking at measures of rank correlation, intergenerational associations have remained much more stable. Comparing estimates of intergenerational income elasticity for younger generations confirms that social mobility remains constrained in Chile and Peru. Our results suggest that the parental background is a decisive factor that influences the income distribution and educational achievement of current generations in both countries. Whereas our cross-sectional estimates of educational mobility suggest that mobility has increased for younger cohorts compared to older ones, persistence remains high when compared to other regions. We use a ‘Two Sample Instrumental Variable’ (TSIV) strategy to estimate intergenerational income elasticity, and the findings confirm those obtained for education. Our results not only suggest that persistence is stronger at the top and bottom of the distribution – a finding that is more pronounced for educational mobility. They also support the argument that parental income and education interact with each other.