Intergenerational income mobility in the UK : new evidence using the BHPS and understanding society

Using a new dataset combining the British Household Panel Survey and Understanding Society, I estimate the intergenerational income elasticity in the UK for individuals born between 1973 and 1991. Employing the traditional OLS approach as well as an alternative two-stage residual method that better controls for life-cycle effects, my results indicate that the intergenerational income elasticity is approximately 0.25. This means that around one quarter of every additional 1% of income advantage enjoyed by parents is passed on to their children. I also estimate income rank coefficients, which are a measure of positional mobility in the income distribution and these results corroborate the analysis of elasticities. These main results are largely robust to changes in the specifications of the model, sample restrictions and to the use of different measures of income. I also obtain regional estimates of mobility, and find large differences between the North and South of England