Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility

Raj Chetty, William A. Ackman Professor of Economics, Harvard University

Abstract: We show that intergenerational mobility changed rapidly by race and class in recent decades and use these trends to study the causal mechanisms underlying changes in economic mobility. For white children in the U.S. born between 1978 and 1992, earnings increased for children from high-income families but decreased for children from low-income families, increasing earnings gaps by parental income (“class”) by 30%. Earnings increased for Black children at all parental income levels, reducing white-Black earnings gaps for children from low-income families by 30%. Class gaps grew and race gaps shrank similarly for non-monetary outcomes such as educational attainment, standardized test scores, and mortality rates. Using a quasi-experimental design, we show that the divergent trends in economic mobility were caused by differential changes in childhood environments, as proxied by parental employment rates, within local communities defined by race, class, and childhood county. Outcomes improve across birth cohorts for children who grow up in communities with increasing parental employment rates, with larger effects for children who move to such communities at younger ages. Children’s outcomes are most strongly related to the parental employment rates of peers they are more likely to interact with, such as those in their own birth cohort, suggesting that the relationship between children’s outcomes and parental employment rates is mediated by social interaction. Our findings imply that community-level changes in one generation can propagate to the next generation and thereby generate rapid changes in economic mobility. (with co-authors Will Dobbie, Benjamin Goldman, Sonya R. Porter, and Crystal S. Yang)

Raj Chetty is the William A. Ackman Professor of Economics at Harvard University and the Director of Opportunity Insights, which uses big data to study the science of economic opportunity: how we can give children from all backgrounds better chances of succeeding? Chetty’s work has been widely cited in academia, media outlets, and policy discussions in the United States and beyond. Chetty received his Ph.D. from Harvard University in 2003 and is one of the youngest tenured professors in Harvard’s history. He has received numerous awards for his research, including a MacArthur “Genius” Fellowship, the John Bates Clark medal, given to the economist under 40 whose work is judged to have made the most significant contribution to the field, and Harvard’s George Ledlie prize, awarded for research that made the most valuable contribution to science, or in any way for the benefit of mankind.

Click here to read the paper.