The Great Gatsby Curve

Interesting to learn this new term / phenomenon today. This is not a new finding though.

The Great Gatsby Curve illustrates the connection between concentration of wealth in one generation and the ability of those in the next generation to move up the economic ladder compared to their parents.

The curve shows an increasingly rigid economic structure, that children from poor families are less likely to improve their economic status as adults in countries where income inequality was higher – meaning wealth was concentrated in fewer hands – around the time those children were growing up.

This  means :

Rich children predestined to grow up wealthy, and poor children more likely to remain impoverished in adulthood. 

The parent’s income is a strong predictor of their children’s future income.

However, countries with low levels of inequality (Lower Gini Coefficient ~0.2) such as Denmark, Norway and Finland had some of the greatest mobility (a
low correlation of earnings of parents and children), while the country with the high level of inequality— US —tend to have lower social mobility.

Note : The curve was introduced in a 2012 speech by chairman of the Council of Economic Advisers Alan Krueger, and the President’s Economic Report to Congress, using data from labor economist Miles Corak

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