Why Is U.S. Economic Mobility Worse in the South? – Bloomberg 08-08-13

Salient to Investors:

Cass R. Sunstein at Harvard writes:

Comparative research on intergenerational mobility raises legitimate questions about the claim that the US stands out as a land of opportunity. A 2006 study found that in intergenerational mobility, the US lagged behind Nordic nations as well as the UK. For example, Danish men born to households in their bottom quintile are far more likely than their US counterparts to rise to the higher quintiles.

A July 2013 study found that the US shows less intergenerational mobility than a number of other countries, including Germany, New Zealand, Canada, Australia, France and Japan. If an American is born to poor parents, he has a decent chance of staying poor, and if born to wealthy parents, there is a good chance he will end up in the economic elite.

Raj Chetty et al at Harvard found that:

  • US intergenerational mobility varies across regions, states and cities. If you are born in Pittsburgh, Boston, San Francisco, Minneapolis or New York, you have a fair chance of getting to the top quintile of the income distribution, even if you start out in the bottom fifth. But if you are born in the lowest quintile in Atlanta, Charlotte, Nashville and Raleigh you are significantly more likely to get stuck.
  • Almost all of the West has a high degree of intergenerational mobility. The Northeast and Southwest look good. The Midwest is mixed, with generally high levels of mobility in Minnesota, Nebraska and North Dakota but low levels in cities including Detroit, Indianapolis and Columbus, Ohio.
  • Intergenerational mobility is markedly lowest in the Southeast, where cities dominate the list of the worst levels of mobility – Georgia, Mississippi, South Carolina, North Carolina and Tennessee.
  • Regional differences in mobility have little to do with differences in growth. The same regional differences appear even after controlling for race.
  • The US as a whole is not suffering from especially low levels of intergenerational mobility.
  • In general, tax expenditures aimed at low-income taxpayers have significant impacts on economic opportunity. Intergenerational mobility is higher in states that have a generous earned income tax credit as well as progressive income taxes and tax expenditures.

Read the full article at  http://www.bloomberg.com/news/2013-08-08/why-is-u-s-economic-mobility-worse-in-the-south-.html

Click here to receive free and immediate email alerts of the latest forecasts.