Melissa S. Kearney: Income Inequality, Social Mobility, and the Decision to Drop Out of High School


Monday, February 29, 2016, 12:00pm to 1:45pm


Harvard Kennedy School: Allison Dining Room

Melissa S. Kearney, Professor of Economics, University of Maryland.

It is widely documented that places with higher levels of income inequality have lower rates of social mobility. But it is an open question as to whether higher income inequality leads to impeded upward mobility.

We propose that one channel by which higher rates of income inequality might lead to lower rates of upward mobility is through lower rates of human capital investment among low-income individuals. Specifically, we posit that greater levels of income inequality could lead low-income youth to have a lower perceived return to their own investment in human capital, which could offset any potential “aspirational” effect coming from higher inequality levels.

The data are consistent with this prediction and provide robust evidence that low-income youth are more likely to drop out of school if they live in a place with a greater gap between the bottom and middle of the income distribution. This finding is robust to a number of tests for confounding factors.

This analysis offers an explanation for how income inequality might lead to a perpetuation of economic disadvantage and has implications for the types of interventions and programs that would effectively promote upward mobility for low-SES youth.

This work was also presented at a Brookings Papers on Economic Activity conference, March 11, 2016. 
Learn more and get the paper

About the speaker

Melissa S. Kearney is a Professor of Economics at the University of Maryland. She is also a Research Associate at the National Bureau of Economic Research and a non-resident Senior Fellow at Brookings. She previously served as Director of the Hamilton Project at Brookings from 2013-2015 and currently serves on the Project's Advisory Council.

Kearney's research focuses on issues of social policy, poverty, and inequality. Many of her papers examine the effect of government programs and economic conditions on the behaviors and outcomes of economically disadvantaged populations. See publications tab on Kearney's website to learn more.

Kearney received her PhD in Economics from the Massachusetts Institute of Technology in 2002 and her BA from Princeton University in 1996.

See also: Spring 2016