Income Inequality, Social Mobility, and the Decision to Drop Out of High School

摘要

It is widely documented that places with higher levels of income inequality have lower rates of social mobility. But it is an open question whether and how higher levels of inequality actually lead to lower rates of mobility. We propose that one channel through which higher rates of income inequality might lead to lower rates of upward mobility is lower rates of human capital investment among low-income individuals. Specifically, we posit that greater levels of income inequality could lead low-income youth to perceive a lower rate of return on investment in their own human capital. Such an effect would offset any potential "aspirational" effect coming from higher educational wage premiums. The data are consistent with this prediction: Individuals from low socioeconomic backgrounds are more likely to drop out of school if they live in a place with a greater gap between the bottom and middle of the income distribution. This finding is robust in relation to a number of specification checks and tests for confounding factors. This analysis offers an explanation for how income inequality might lead to a perpetuation of economic disadvantage, and it has implications for the types of interventions and programs that would effectively promote upward mobility among youth of low socioeconomic status.