Author
Summary
A new method is proposed to decompose three distinct aspects of intergenerational income elasticity (IGE): rank correlation, income inequality, and income growth. This method improves upon existing approaches in two ways: (i) it is independent of the order of decomposition sequences; (ii) it offers an analytical closed form to decompose the IGE. Empirically, the United States demonstrates greater social mobility but faces more significant income inequality compared to the U.K., despite both countries exhibiting similar levels of IGE. The decline in IGE among the latest cohorts coincides with an increase in income equality, which challenges the Great Gatsby Curve.