Much ado about nothing

From In Climbing Income Ladder, Location Matters by David Leonhardt. This research generated a lot of discussion though its findings are much more nuanced than summarized in the news articles, somewhat suspect, and open to alternative interpretations. There always seems a desperate desire to find people innocent of all responsibility and to ascribe disparate life outcomes to external circumstances such as race, or gender, or orientation, or age, or class, or, in this case, location, etc.

In fact, the study is something of a mess, committing most of Philip A. Schrodt's Seven Deadly Sins of Contemporary Quantitative Political Analysis.

Indeed, the author's aver that there is little or no useful knowledge arising from the study but do assert that the issue is an important one that researchers such as themselves ought to be funded to study in greater depth.

We caution that all of the findings in this study are correlational and cannot be interpreted as causal effects. For instance, areas with high rates of segregation may also have other differences that could be the root cause driving the differences in children’s outcomes. What is clear from this research is that there is substantial variation in the United States in the prospects for escaping poverty. Understanding the properties of the highest mobility areas – and how we can improve mobility in areas that currently have lower rates of mobility – is an important question for future research that we and other social scientists are exploring.

The article is poorly edited because the heart of the findings is lost in verbiage.

But the researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.

Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.

If I am interpreting this correctly, it seems that the key findings are that good life outcomes in terms of income and income mobility are associated with:

1) Familial structure (get married and stay married)
2) Education attainment
3) Civic involvement
4) Class integration

But if you go to the report it is slightly different.

The authors were originally looking to see whether "tax expenditures such as the Earned Income Tax Credit can increase the level of intergenerational income mobility in the U.S.". By their phrasing, it appears that the authors were hoping that the research would show that tax policy could fix low income mobility. If you read the first half of the paragraph where they report the results, they seem to imply that tax policy does have a material impact.

We found a significant correlation between both measures of mobility and local tax rates, which are tax expenditures for the federal government because they are deductible from federal income taxes. We found a weaker correlation between state EITC policies and rates of intergenerational mobility.

But the second half of the paragraph undercuts that conclusion.

Although tax policies account for some of the variation in outcomes across areas, much variation remained to be explained. To understand what is driving this variation and better isolate the effects of the tax expenditures themselves, we considered other explanatory factors.

Translation - Tax policies do have some correlation with improved income mobility but we don't know if it is causative and even if it were causative, it only explains a small part of the variation in income mobility rates.

So what does enhance income mobility? Scattered around the text are the answers. Factors correlating with higher income mobility include:

1) The quality of the K-12 school system also appears to be correlated with mobility
2) Areas with higher test scores (controlling for income levels)
3) Lower dropout rates
4) Religious individuals
5) Married couple parents

Interestingly, income inequality was not correlated with mobility patterns.

Ultimately, this study does nothing to establish causation but it does show that there is a high correlation between traditional values and behaviors (work effort, valuation of education, commitment to community, preservation of family, etc.) and higher income mobility.

Indirectly it supports the apples-and-oranges comparison paradox (see The Texas-Wisconsin Paradox and intergenerational income mobility and US Education: Expensive and ineffective? Not so fast). My suspicion is that when someone gets around to looking at income mobility rate comparisons internationally, we will see the same phenomenon globally that we have seen with income, with education attainment, and with health comparisons. The US, because of its heterogeneous population will hover around the middle or slightly better than the middle when viewed as a homogeneous whole. However, when you compare the US cultural groups with ancestral countries, you will find that the average American of that group will perform much higher on income mobility than the source countries.