Genetic ability and intergenerational earnings mobility

This paper examines the role of genetic ability in generating the strong positive intergenerational earnings correlation observed in the USA. We compare the intergenerational wage and earnings elasticities of adopted children with these of non-adopted children. Because adopted children’s genetic ability does not depend on that of their adoptive parents, the differences between these two samples reveal the importance of genetic ability in transmitting earnings ability across generations. We find that the earnings correlation between fathers and children would be halved if their biological link was removed. Our results suggest that inheritable ability plays a very important role in passing parents’ earnings ability on to their children.