Patterns of persistence: Intergenerational mobility and education in South Africa

How should the correlation between the earnings of parents and children in South Africa be calculated in the presence of high unemployment, and what is the role of education in determining this relationship? We use the first four waves of the National Income Dynamics Study (NIDS) for 2008 to 2014/15, and the 1993 Project for Statistics on Living Standards and Development (PSLSD) to investigate the shape of the association between parental and child earnings across the earnings distribution, and find that the correlation is strongest at the ends of the distribution. We correct for possible biases that arise from co-resident parent-child pairs, and from selection into labour market participation in South Africa’s high-unemployment society. We find that correcting for selection into employment increases the intergenerational elasticity of earnings by approximately 10 per cent. We unpack the role of education in determining the association of intergenerational earnings and find that the impact is strongest at the bottom of the earnings distribution, and that education accounts for approximately 40 per cent of the total intergenerational earnings elasticity. The Research Project on Employment, Income Distribution and Inclusive Growth is based at SALDRU at the University of Cape Town and supported by the National Treasury. Views expressed in REDI3x3 Working Papers are those of the authors and are not to be attributed to any of these institutions. © REDI3x3 1 www.REDI3x3.org Patterns of persistence: Intergenerational mobility and education in South Africa∗ Arden Finn†, SALDRU, UCT Murray Leibbrandt‡, SALDRU, UCT Vimal Ranchhod§, SALDRU, UCT ∗Acknowledgements: The authors gratefully acknowledge support from the REDI 3X3 project for financial assistance in writing this paper. All authors acknowledge financial support from the Programme to Support Propoor Policy Development in the Department of Planning Monitoring and Evaluation. Arden Finn acknowledges the National Research Foundation for financial support for his doctoral work through the Chair in Poverty and Inequality Research. Murray Leibbrandt acknowledges the Research Chairs Initiative of the Department of Science and Technology and National Research Foundation for funding his work as the Chair in Poverty and Inequality Research. Vimal Ranchhod acknowledges support from the Research Chairs Initiative of the Department of Science and Technology and the National Research Foundation. †[email protected] Doctoral student and researcher at the Southern Africa Labour and Development Research Unit, University of Cape Town. ‡[email protected] Professor of economics and director of SALDRU at the University of Cape Town. §[email protected] Associate professor in SALDRU at the University of Cape Town.