The Effects of Workplaces on Intergeneratioal Mobility

Using a novel administrative dataset that links more than two million children born between 1985 and 1990 to their fathers via an algorithm applied to the Institute for Employment Research’s (IAB) Integrated Employment Biographies (IEB), we characterize intergenerational income mobility in Germany.
First, we characterize the joint distribution of parental and child incomes at the national level. The conditional expectation of child income given parental income is approximately linear in percentile ranks. On average, a 10 percentile increase in parental income rank is associated with a 2.9 percentile increase in a child’s income.
Second, leveraging our large sample, we document substantial geographic variation in both relative and absolute upward mobility across 141 local labor markets (LLMs) in Germany. Children of fathers in the bottom income quartile who grow up in Berlin end up 12 percentiles lower in the national income distribution than their low-income peers in Munich.
Third, following Chetty and Hendren (2018), we exploit variation in children’s ages at which families move across LLMs to estimate childhood exposure effects. We find that LLMs have significant childhood exposure effects. The income of children whose families move to a better LLM — as measured by the income ranks of children already living there — converges to the income of permanent residents in the destination LLM at a rate of approximately 2% per year of childhood exposure.
Finally, we find similar exposure effects when analyzing the quality of establishments where children work in adulthood, measured by the seniority-weighted average establishment AKM percentile rank at ages 29–33. Motivated by this finding, we construct establishment-level statistics on parents’ incomes and childrens’ earnings outcomes for more than 100,000 German establishments. We focus on two key components: (i) the fraction of children from low-income families and (ii) the fraction of such children who reach the top quintile in the national income distribution. The product of these two statistics is the establishment’s upward mobility rate. These metrics allow us to (a) analyze workplace effects on intergenerational mobility and causal place effects in detail and (b) simulate how changes in the allocation of children across establishments affect overall intergenerational mobility and the childhood exposure effects of local labor markets.