Intergenerational earnings mobility and macroeconomic shocks: Evidence based on administrative records

This paper provides novel evidence on trends in intergenerational earnings mobility in a developing country and explores some transmission mechanisms associated with the characteristics of the labor market. Using a novel social security records database for Uruguay, we study the intergenerational earning ranking association from cohorts between 1966-1983. To explore intergenerational transmission mechanisms, we exploit the arguably exogenous variation induced by the 2002 macroeconomic crisis to analyse the impact of parental displacement from jobs on their children’s labor trajectories. First, we focus on the effect of the crisis on parents’ labor market performance. In a second stage, we use this information as a shock to identify the effect on children outcomes of a parent’s employment shock. Results suggest (i) heterogeneity on the degree of intergenerational earning mobility across birth cohorts; (ii) weak evidence of downward trend in relative mobility, (iii) intergenerational transmission of the shock produced by the 2002 crisis.