Nonlinearities in the Becker-Tomes-Solon model

Abstract

The aim of this paper is to explore nonlinearities in the relationship between parents and children earnings. We rst discuss a simple extension of the Becker-Tomes-Solon model accounting for nonlinearity. We then test the linearity of intergenerational transmission employing a set of 141 intergenerational mobility tables in 35 di erent countries at di erent time periods, and nd that linearity is rejected in 89 tables. We nally explore the correlation between the \strength of concavity" and income inequality. Our ndings suggest that more unequal societies tend to have a more concave intergenerational transmission process.