Social policy in Britain and the USA is less effective than in Germany at alleviating the inter-generational transmission of social and economic disadvantages, according to a new paper from the German Institute for Economic Research.
The paper tests the hypothesis that the extent of inter-generational income mobility, and the relative risk of poverty, differ according to factors in the three countries such as welfare state regime, family role patterns and social policy design.
- Though similar in terms of their welfare state regime, Britain and the USA differ concerning the average inter-generational income elasticity and the relative risk of poverty.
- In the USA the inter-generational correlation of social and economic status is higher than in Germany and Britain, which contradicts the hypothesis of a mobile society, and a high 'permeability' of the social system.
- In all the countries, the highest inter-generational income persistence is evident in the 'tails' of the income distribution. In Germany, the results reveal the highest inter-generational income mobility in the lower tail of the income distribution, indicating that social policy more effectively alleviates the inter-generational transmission of social and economic disadvantages than in Britain and the USA.
- In the USA, the highest income persistence occurs at the upper tail of the income distribution, consistent with the idea that low-income parents cannot sufficiently contribute to the well-being of their children. This results in an increasing inter-generational transmission of poverty and social exclusion, a deepening of economic and social inequality across generations, and economic inefficiencies that impose economic and social costs.
Source: Veronika Eberharter, The Intergenerational Dynamics of Social Inequality: Empirical Evidence from Europe and the United States, SOEPpaper 588, German Institute for Economic Research