Assortative Mating and Family Links in Permanent Earnings

by Lee A. Lillard, M. Rebecca Kilburn

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This paper provides a number of new results regarding the contribution of family background to individual permanent earnings. First, the authors show that sibling correlations include a gender-neutral family component associated with having the same parents and gender-specific components shared by only same-sex siblings. The magnitude of these sibling links is robust to generalization of the transitory earnings component to an auto-regressive moving average. The measured contribution of parents' earnings to the permanent earnings of their sons and daughters is quite sensitive to the specification of the transitory earnings component of the parents, which is measurement error in a model of intergenerational links. Accounting for autocorrelation in parents earnings more than doubles the apparent effects of father's permanent earnings on that of both sons and daughters. Father's and mother's permanent earnings are strongly linked, indicating positive assortative mating in that dimension. The net direct contribution of mother's permanent earnings on her children is effectively zero. Children also positively assortatively mate on permanent earnings, and the correlation in permanent earnings of women who marry brothers and men who marry sisters is explained completely by the family components of the brothers and the sisters.

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