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The apple and the tree

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How much of my relative wealth today is a direct result of the relative wealth of my parents? And my grandparents? And my great-grandparents?

Because of South Africa’s unequal society, understanding the extent to which wealth (or income) persists over generations is important. Public opinion on policies that promote some form of redress or redistribution – affirmative action and black economic empowerment – is usually split between those favouring an end to ‘a new form of racism’ and those who feel not enough is being done. One way to scientifically quantify the legacy of the past is to calculate what economists call intergenerational social persistence, a ratio that calculates how much the present generation’s income can be explained by their parents’ incomes. Intergenerational persistence is usually quite low in countries with low inequality, such as Sweden (a ratio of 0.2), whereas intergenerational persistence is high in countries with high inequality, such as America (0.5) and South Africa.

Frans Hals, Family Portrait in a Landscape

Frans Hals, Family Portrait in a Landscape

Parental income is not the only measure that is important for the next generation. As Stellenbosch PhD-student Asmus Zoch shows in a recent working paper, very little is left to explain the inequality in South African education outcomes once you control for a child’s socio-economic background. This means that your education depends not on how hard you work, but on your fortitude to be born in a rich household. Specifically, he finds, “the single most important variable to explain schooling outcomes are mother’s education.” This result is confirmed by earlier research. Perhaps this points to adult education as an important policy in alleviating education disparities of future generations?

But these are simply estimates of persistence across two successive generations. Does intergenerational persistence exist across multiple generations, perhaps over 5 or more? This is a question that Patrizio Piraino, Sean Muller, Jeanne Cilliers and I address in a recent working paper which I will present at the European Historical Economics meetings in London on Friday. Multiple generations present a number of data challenges: Usually, income data are not available. Even if income data were available, there would be strong biases in favour of men and of employment in the formal sector; farmers and domestic workers, for example, would usually be excluded. We circumvent this problem by focusing on yet another measure of well-being: longevity. In short: how much of your life duration can be explained by the life duration of your parents and grandparents?

To answer this, we use a genealogical dataset of European descendants in South Africa between 1652 and 1850. This rich dataset – of 122,766 individuals over 6,485 families – allows us to match not only boys and girls to their fathers, but also to their grandfathers, and also boys and girls to their siblings and even to their cousins. We find positive and significantly persistent effects that parents who grew old also had children who grew old, ceteris paribus (we limit the sample to only those children above 15 years or their reproductive age). Interestingly, we don’t find any statistically significant effects for grandfathers on their grandchildren. That might either be because grandfathers’ longevity do not persist over two generations, that the effect is too small to register, or that mobility was quite high in the Cape Colony and therefore we find no effect.

While the effect of fathers’ longevity on their children is not as large as one would typically find if income is used – our coefficient ranges from 0.05 to 0.1 – it does suggest that children inherit traits from their parents. Here, of course, we enter another literature, that of the genetic inheritance that one receives from your parents versus the socio-economic characteristics (the typical nature versus nurture debate). We can test which of these effects dominate by considering cousins, who share the same grandfather but not the same parents. We find that a cousin-pair is more likely to be correlated than a pair of two randomly chosen individuals, but not because of their grandfather. This suggests that the socio-economic environment is more important than genetic inheritance in explaining intergenerational persistence.

Of course, some intergenerational persistence is understandable, even desirable. But if we want to live in a country where every child has an equal opportunity in life, then the socio-economic environment in which those children grow up needs radical improvement. That remains our most difficult challenge.

Written by Johan Fourie

September 4, 2013 at 08:51

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