The Regression Equation Difference in The Income of Parents Question

Question Description

I’m working on a economics question and need an explanation and answer to help me learn.

Whether the “American Dream” is alive and well is a hot topic in current politics.
One way the question is phrased is in terms of intergenerational mobility. The
argument is that our incomes should not be too highly correlated with the incomes of
our parents: it should be possible to succeed economically even if you were born to
poor parents. Many studies have used simple regression analysis to measure the
relation between our own income (Y, usually measured in logs) and our parents’ incomes
(X, also in logs), and have found that a 10% difference in parents’ income (0.10 in
logs) is associated with about a 4% (0.04 in logs) difference in the incomes of their
children as adults. Thus the intergenerational income elasticity is about 0.4. Suppose we design a program that gives low-income parents a 10% increase in income
during the years they are raising kids. Do you think that their children would indeed
earn 4% more as adults, as the regression predicts? Why or why not? Explain, making
reference to the ideas of ceteris paribus and omitted variables bias.

Explanation & Answer:
1 Paragraph

Tags:
economics

American Dream

lowincome parents

Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with FENTYESSAYS.COM ESSAY’s honor code & terms of service.