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Seminar

Social Connections and the Persistence of Income Across Generation


  • Series
  • Speaker(s)
    Jean-William Laliberté (University of Calgary, Canada)
  • Field
    Empirical Microeconomics
  • Location
    Tinbergen Institute, room 1.01
    Amsterdam
  • Date and time

    April 15, 2025
    15:30 - 16:30

Abstract

Are children of high-income families more likely to work at better-paying firms, and if so, why? This paper examines the role of one key potential explanation: differences in social networks. To do so, we use Canadian administrative data to construct an employee-employer-parent-child matched dataset, which we link to detailed educational records. We first show that, in an accounting sense, access to high-paying employers explains roughly half of the transmission of income across generations, as measured by the income rank-rank relationship. We then leverage rich education data to identify the impact of social connections on the probability of working at a given firm by comparing people who have the exact same degree but not the same connections. We find parental connections alone explain 10% of the firm-sorting component of the intergenerational income rank-rank relationship. Finally, firm performance declines when parent business owners hire their own children, suggesting these children receive preferential treatment.