We characterize the joint evolution of cross-sectional inequality in income and consumption across generations. We estimate a model of intergenerational persistence and separately identify influences of parental heterogeneity and idiosyncratic factors. We find evidence of family persistence in earnings and consumption, and of marital sorting. Idiosyncratic heterogeneity, however, accounts for most of cross-sectional inequality. Within-family insurance represents a modest part of overall consumption insurance and is largest for the richest quartile. Insurance among the poorest comes from outside the family. Our findings suggest intergenerational persistence would have to be much higher to induce, by itself, substantial increases in inequality.
First version, August 11, 2020
D15: Intertemporal Household Choice; Life Cycle Models and Saving
D64: Altruism; Philanthropy
E21: Macroeconomics: Consumption; Saving; Wealth