Missing at Random? An Analysis of the Impact of Sample Selection on Integenerational Earnings Elasticities

Liana Fox, Columbia University

Utilizing the Panel Study of Income Dynamics, I provide new estimates of intergenerational earnings elasticities for white and black father-son pairs estimated using the traditional methodology of regressing log child earnings on log parent earnings. I then pay special attention to the impact of commonly-used sample selection restrictions (i.e. excluding unemployed or part-time employed sons from the sample) on intergenerational mobility estimates. I generate predicted estimates of son’s potential earnings (as actual earnings have been censored due to either unemployment or underemployment). I then perform a bounding exercise to examine the range of estimates. I find that the assumption of exogenous selection into full-time employment significantly biases the estimates for blacks, but does not have a large impact on estimates for whites. These results have important implications for research regarding the black-white mobility gap.