Mitnik, Pablo. 2017. “"Person-Weighted" versus "Dollar-Weighted": A Flawed Characterization of Two Intergenerational Income Elasticities.”  Stanford Center on Poverty and Inequality Working Paper.

Abstract

The intergenerational income elasticity (IGE) has been widely misinterpreted as pertaining to the conditional expectation of children’s income when it pertains to its conditional geometric mean, and is affected by serious methodological problems. This has led to a call to replace the conventionally estimated IGE by the IGE of the expectation. This paper shows that a contrasting characterization of these two IGEs as, respectively, ‘person-weighted’ and ‘dollar-weighted’ elasticities, which casts doubts on the desirability of the proposed replacement, is the joint result of a category mistake—equating quantile-specific elasticities to person-specific elasticities—and of misconstruing the nature of the conventional IGE and the epistemic goal it has been meant to serve.