Matthias Schnetzer and Wilfried Altzinger

From rags to riches?

Intergenerational transmission of income in the European Union

27 pages · 5.29 EUR
(October 2011)

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From the introduction:

Matthias Schnetzer and Wilfried Altzinger are concerned with intergenerational income mobility in their contribution. They claim that the perception of a mobile society, where individual effort almost automatically leads to social advancement, is predominant in Western economies. Sociological studies reveal that only a minority of people in the population are aware of class rigidities that limit equality in income and life chances. It is therefore of great interest to know if the social status of an individual is determined by the economic or social situation of his/her ancestor, and if so, to what extent that is the case. From a sociological as well as from an economic perspective, limited social mobility implies a loss of efficiency, since children from socially disadvantaged families hardly have access to the market of so-called high potentials even though they could have specialised skills. Resources would therefore not be deployed adequately, which has social and political consequences. In their attempt to shed light on these issues, Schnetzer and Altzinger use data from the European Union Statistics on Income and Living Conditions (EU-SILC) 2005 to analyse intergenerational income mobility in Austria compared to other European Union members. Applying various methodological approaches like least squares estimations or quantile regressions, the authors reveal substantial differences in intergenerational mobility between Scandinavian countries and Continental Europe. In particular, the results show that the perception of fast social advancement in Austria is limited. The authors conclude that it is not only tax policies or social welfare that may account for intergenerational mobility, but basic modifications to the general educational system are also important. Apparently, Scandinavian countries could serve as a model worth studying for the rest of Europe.