Estimating Nonlinear Intergenerational Income Mobility with Correlation Curves

A correlation curve is proposed as an alternative measure to study the degree of intergenerational income mobility, i.e. how income status is related between parents and adult child. The method overcomes the shortcomings of the elasticity of children’s income with respect to fathers’ income (i.e. its sensitiveness to different dispersion among the generations) and the correlation coefficient (i.e. its inability to capture nonlinearities). The method is particularly suitable for comparative studies and in this study is applied to labour income in comparison to disposable income. Nonlinear correlation curves are found, which in some cases substantially differ from corresponding nonlinear elasticities.