Heterogenous latent factor models using horizontal kinship

Colagrossi, Marco;Deiana, Claudio;Geraci, Andrea;Giua, Ludovica;Mazzarella, Gianluca

2024-01-01

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Abstract

We reconstruct the genealogical tree of all individuals ever appearing in Dutch municipalities records since 1995. Using microdata from tax authorities, we compute a measure of their permanent earnings and assess the degree to which the intergenerational transmission process is heterogeneous. Our analysis relies on traditional estimates as well as model assuming a latent transmission of family endowments. In both cases, we show that offspring born into families belonging to the lowest percentiles of the income distribution show a higher degree of intergenerational persistence. The same applies when looking at heterogeneity in intergenerational mobility along the grandparental wealth, potentially suggesting the existence of poverty traps.