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Matching for Social Mobility with Unobserved Heritable Characteristics | John A. Knowles

Matching for Social Mobility with Unobserved Heritable Characteristics



With Chris Bidner



Abstract

We analyse the intergenerational transmission of `innate ability', focusing on the role of marital sorting. The heritability of ability induces a concern for the ability of potential spouses independently of any concern for their earning capacity. Marriages form on the basis of beliefs about ability (since it is not observed) as well earning capacity (which is observed). Beliefs are informed by earning capacity, but crucially also by family background. We show how the intergenerational transmission of ability becomes sensitive to elements of the economic environment once marital sorting is endogenously determined, but also that policy variables (e.g. income redistribution) generally have no impact. The analysis also reveals a novel `status motive' for parental investment and channel through which the fortunes of grandparents and prior generations persist.