Two-way Causality and the Slope of the Great Gatsby Curve: Evidence from US Regional and Cross-country Data
- Authors
- Jeon, Booil Philip; Lee, Young
- Issue Date
- Aug-2020
- Publisher
- 한국재정학회
- Keywords
- income inequality; mobility; education; Great Gatsby Curve; 소득불평등도; 이동성; 도구변수 추정; 교육; 개츠비(Gatsby) 곡선
- Citation
- 재정학연구, v.13, no.3, pp.157 - 194
- Indexed
- KCI
- Journal Title
- 재정학연구
- Volume
- 13
- Number
- 3
- Start Page
- 157
- End Page
- 194
- URI
- https://scholarworks.bwise.kr/hanyang/handle/2021.sw.hanyang/145337
- ISSN
- 1976-8362
- Abstract
- This paper investigates the slope of the Great Gatsby Curve, while allowing for the two-way causal relationship between mobility and inequality and controlling for a host of potential determinants of the relationship. Our estimation results based on US regional data indicate that the effects of inequality on mobility in instrumental variable estimations are more than three times larger than those in comparable OLS estimations. The estimated relationship between mobility and inequality using US regional data displays a stable equilibrium. The identified multiplier effect indicates that policies for one would have a positive effect on the other, implying that redistributive policies may have the additional benefit of improving mobility. Estimation results using the cross-country data show a strong positive association of mobility with public expenditure on tertiary education directed at individuals, indicating the importance of scholarships and student loans in improving mobility.
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