Spillover bias in multigenerational income regressions

A growing literature studies long-term income persistence across more than two generations. Despite a rich understanding of measurement-related biases for the parentchild model, far less is known multigenerational model that captures transmission from parents and grandparents. We show even using 25-year average can result in spurious grandparent coefficients. Importantly, given parental measure, averaging over years grandparents increases spillover bias. propose an IV approach effectively mitigate bias with shorter timespans income. With Norwegian administrative data, we reveal positive grandfather