Wealth Mobility
Children's economic outcomes correlate substantially with their parents' — more in some countries than others. The 'intergenerational elasticity of income' ranges from ~0.15 (Denmark, Norway, Finland) to ~0.50 (US, UK, Italy). The Great Gatsby curve shows that countries with more inequality tend to have less mobility. The US — historically branded as the land of opportunity — has lower mobility than most Northern European countries.
Key insights
The Great Gatsby curve
Plotted by Alan Krueger (2012): more unequal countries tend to have less intergenerational mobility. Mechanism: when income gaps are wide, children of high-income parents have larger advantages (education access, networks, capital, geography). Countries with compressed income distributions (Nordics) leave less room for parental advantage to matter. The relationship is robust across measurement methods.
Nordic countries lead mobility, but...
Denmark, Norway, Finland, Sweden have intergenerational income elasticities of 0.15-0.25 — children's incomes are only modestly predicted by parents'. Drivers: universal high-quality education, accessible healthcare, low income inequality at start, strong unions. But recent research (Landersø-Heckman) shows that conditional on schooling, Danish mobility is closer to US — the social mobility advantage comes through the universal-services channel, not from elimination of parental advantage per se.
US mobility has been overestimated
The 'American Dream' narrative is at odds with the data. Chetty et al. (Equality of Opportunity Project) found US children of bottom-quintile parents have ~7.5% chance of reaching top quintile — vs 11.5% in Canada, 13% in Denmark. US mobility has been stable or declining since the 1980s. Mobility varies enormously by US region — high in some Midwest and Mountain West areas; very low in Deep South and Industrial Midwest. The 'land of opportunity' label is partly geographically variable.
Intergenerational income elasticity by country
Higher = less mobile (more parental income transmission)
Key Finding: Nordics show the highest mobility; UK, US and Italy at the bottom of OECD rankings.
US absolute upward mobility by birth cohort
% of children earning more than parents at same age
Key Finding: Roughly 90% of 1940 cohort earned more than their parents; only ~50% of 1980 cohort did. Mobility decline is a 50-year trend.
Methodology & caveats
Measuring IGE
Intergenerational income elasticity = regression coefficient of log child income on log parent income. IGE of 0.5 means 50% of parental income gap persists to children's generation. IGE of 0 means no transmission; IGE of 1 means full transmission. Cross-country comparisons require comparable definitions (lifetime vs annual income, equivalent ages of measurement). Long-run lifetime measures (preferred) require multi-decade panel data — only Scandinavian countries have ideal data.
Absolute vs relative mobility
Relative mobility: where children end up in the income distribution relative to other children, vs where their parents were. Absolute mobility: whether children earn more than their parents in real terms (regardless of relative position). The US has middling relative mobility and declining absolute mobility. Northern European countries have high relative mobility and steady absolute mobility.
Wealth mobility is even less
Wealth IGE is typically 1.5-2× income IGE — meaning wealth persists more strongly across generations than income. Causes: inheritances directly transfer wealth, assortative mating concentrates wealth, networks and information about wealth-building strategies are inherited. Wealth mobility is harder to measure (wealth surveys are less standardized than income surveys) but consistently lower than income mobility.