Joachim Kahr Rasmussen defends his PhD thesis at the Department of Economics

Candidate

Joachim Kahr Rasmussen, Department of Economics, University of Copenhagen

Title

Essays on the Economics of Intergenerational Mobility and More

Supervisors

Professor Søren Leth-Petersen
Professor Claus Thustrup Kreiner

Assessment Committee

  • Associate Professor Thomas Høgholm Jørgensen Department of Economics
  • Associate Professor Martin Nybom , University of Uppsala
  • Associate Professor Malene Kallestrup-Lamb , University of Aarhus

Summary

This PhD thesis consists of four chapters. Despite the fact that the chapters are to some extent related and complement each other, they are fundamentally self-contained.

In the first chapter, co-authored with Ulrika Ahrsjö and René Karadakic, we present new evidence on the existence and drivers of trends in intergenerational income mobility using administrative income data from Scandinavia along with survey data from the United States. Harmonizing data from Sweden, Denmark and Norway, we find that intergenerational rank associations in income have increased uniformly across Sweden, Denmark, and Norway for cohorts born between 1951 and 1979. Splitting these trends by gender, we find that father-son mobility has been stable, while family correlations for mothers and daughters trend upwards. We argue that the observed decline in intergenerational mobility is consistent with female skills becoming increasingly valued in the labor market.

In the second chapter, co-authored with Julie Marx, we exploit detailed wealth records from Denmark along with multi-generational family linkages in order to investigate the extent at which inheritances from grandparents are invested in children. We find that inheritances have a substantial impact on child human capital accumulation as measured by school performance if received around the time of birth, while the impact is smaller in later years. In a series of event studies, we rationalize this finding. In particular, we provide evidence of substantial reductions in parental labor supply and movements to better neighborhoods in response to receiving inheritances, and these effects are stronger when parents have young children.

In the third chapter, co-authored with Kristian U. O. Larsen, we assess the applicability of reinforcement learning (RL) in approximating solutions to stylized discrete-time dynamic stochastic control problems known from the economic literature. We mainly direct our attention to problems where the state-action space is large and potentially continuous. Using different RL-based algorithms for solving these complex problems, we find that RL indeed shows promising potential in dealing efficiently with high dimensionalities. However, we also highlight that time-efficient solutions to high-dimensional problems with reinforcement learning generally relies on efficient tuning of hyperparameters – a process that can be tremendously.

The fourth and final chapter of this dissertation is early stage work in which I investigate what drives estimates of intergenerational income mobility in the very long run. As already touched upon in the first chapter, a growing empirical literature has in recent years documented how intergenerational mobility in income has been declining over several decades. In parallel, a far more mature literature has discussed whether skill-biased technological change induced by a rising supply of skilled workers has caused the return on skill to rise. An open question is whether these two phenomena are related. Utilizing a multi-generational model of skill-specific technologies where the direction of research is endogenous and responds to profit incentives, and where workers endogenously select into occupations taking specialization costs and their individual skill composition into account, I characterize how changes in the equilibrium allocation of skilled labor (arising from shifts in the demand or supply for skilled labor) may drive dynamics in skill premia and earnings dispersion. Making the assumption that latent skills are partly inherited, I show that such changes may also affect long run intergenerational income mobility, and I find that at sufficiently high degrees of substitution between skilled and unskilled production, intergenerational mobility is locally declining in association with a rising equilibrium skill supply.