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Abstract

Using data linked across generations in the Panel Study of Income Dynamics, I estimate the relationship between exposure to volatile income during childhood and a set of socioeconomic outcomes in adulthood. The empirical framework is an augmented intergenerational income mobility model that includes controls for income volatility. I measure income volatility at the family level in two ways. First, instability as measured by squared deviations around a family-specific mean, and then as percent changes of 25 percent or more. Volatility enters the model both separately and interacted with income level. I find that family income instability during childhood has a small, positive association with high school dropout– one which appears driven by volatility among children from lower income households. Evidence suggests that volatility exposure generally has a minimal impact on intergenerational outcomes relative to permanent income.

Document Type

Research Paper

Publication Date

8-2012

Discussion Paper Number

DP 2012-03

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