We present results from a new data set, the Statistics of Income Mobility Panel, that has been assembled from tax and other administrative sources to provide evidence on economic mobility and persistence in the United States. This data set allows us to take on the methodological problems that have complicated previous efforts to estimate intergenerational earnings and income elasticities. We find that the elasticities for women’s income, men’s income, and men’s earnings are as high as all but the highest of the previously reported survey-based estimates.

The intergenerational income elasticity (IGE)—the workhorse measure of economic mobility—has very often been estimated with short-run income measures drawn from two independent samples and using the Two-Sample Two-Stage Least Squares estimator. The IGE conventionally estimated in the literature, however, has been widely misinterpreted: While it is assumed that it pertains to the conditional expectation of children’s income, it actually pertains to its conditional geometric mean.

The intergenerational income elasticity (IGE) has been widely misinterpreted as pertaining to the conditional expectation of children’s income when it pertains to its conditional geometric mean, and is affected by serious methodological problems. This has led to a call to replace the conventionally estimated IGE by the IGE of the expectation.