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Thursday, January 23, 2014

'A Response to Scott Winship’s Analysis of The Great Gatsby Curve'

Sticking with today's apparent theme of inequality and mobility, here's a rebuttal from Carter Price at the Washington Center for Equitable Growth to a recent claim that there is no relationship between inequality and mobility (also, on the "single motherhood" issue, see here):

A Mathematical Response to Scott Winship’s Analysis of The Great Gatsby Curve, by Carter Price, Washington Center for Equitable Growth: While we know today’s big inequality and mobility news is Raj Chetty, Emmanuel Saez, and others’ new paper on variance in mobility over time — which we’ll be discussing shortly — we wanted to take a moment to look at the math behind some analysis derived from some of the previous data they have collected from their Equality of Opportunity Project on variance in mobility over geography.
The “Great Gatsby Curve,” a term coined by Princeton economist Alan Krueger based on the work of Ottawa economist Miles Corak, shows that across developed countries, higher economic inequality is associated with lower mobility. This curve has sparked a great deal of debate particularly because the United States stands apart among the developed nations for its high inequality and low mobility.
In a recent foray into this debate, Manhattan Institute sociologist Scott Winship and Heritage Foundation research assistant Donald Schneider use data from the Equality of Opportunity Project to look at the relationship between inequality and mobility across U.S. “commuting zones,” which are groups of counties that form a common labor market. (The Equality of Opportunity Project assessed economic mobility by looking at the 2011-12 incomes of people born in 1980-82 and their parents’ incomes from 1996-2000.) Winship and Schneider conclude that this new data indicate that mobility is actually largely unrelated to economic inequality and that the core reason for low economic mobility is single motherhood.
I’ve reproduced their findings, but I don’t come to the same conclusions. Winship and Schneider don’t weight the data properly and ignore too much of the data. Thus, I do not conclude that they provide compelling arguments to ignore economic inequality when discussing economic mobility....

While analysis of multiple measures of inequality and multiple measures of mobility suggest that economic inequality is negatively associated with economic mobility, much more analysis needs to be done to fully understand these complex relationships. In particular, the mechanisms that drive these relationships should be understood. I hope that this dispels some of the faulty analysis and encourages more rigorous analysis of these data.

[See the article for regressions, graphs, and analysis supporting the conclusions.]

    Posted by on Thursday, January 23, 2014 at 10:46 AM in Economics, Income Distribution | Permalink  Comments (3)


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