Is intergenerational economic mobility high or low in the Eighth Federal Reserve District?1 Are there areas with extremely high or extremely low mobility? In an article in The Regional Economist, Economist Alejandro Badel and Economic Content Manager Julia Maues, both with the Federal Reserve Bank of St. Louis, discussed these questions using results from a 2014 study by economists Raj Chetty, Nathaniel Hendren, Patrick Kline and Emmanuel Saez (CHKS hereafter).2
The CHKS study measures mobility for every “commuting zone” in the U.S. using a comprehensive data set that contains the incomes of more than 40 million people and their parents between 1996 and 2012. The data set is constructed from federal tax returns.
Badel and Maues focused on the simplest indicator of mobility provided by CHKS: the probability of moving from the bottom fifth to the top fifth of U.S. income distribution in one generation.3 Specifically, they looked at the mobility indicator in all of the commuting zones that contain at least one county belonging to the Eighth District.
The Eighth District is composed of 339 counties covered by 81 commuting zones. Averaging the mobility indicator across these counties, the probability of moving up was 6.4 percent in the Eighth District, compared to the national average of 8.1 percent. This probability is comparable to that faced by those growing up in Tampa, Fla. (6 percent), Baltimore (6.4 percent) and Chicago (6.49 percent). However, it is much lower than the probability of moving up for those growing up in Salt Lake City (10.8 percent) and San Jose, Calif. (12.9 percent).
Badel and Maues found that the District contains areas with extremely low income mobility. In Memphis, Tenn., one of the four largest metro areas in the District, the probability of moving up was only 2.8 percent. Three commuting zones in Mississippi had even lower probabilities, with one of those zones—Greenville, Miss.—having the lowest probability of moving up in the nation at 2.2 percent.
1 The Eighth Federal Reserve District includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
2 Chetty, Raj; Hendren, Nathaniel; Kline, Patrick; and Saez, Emmanuel. "Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States." Working Paper, National Bureau of Economic Research, January 2014.
3 The measures of intergenerational economic mobility in CHKS are computed by taking the group of people born in 1980-82 and comparing the income of their parents in 1996-2000 (when they were between 14 and 20 years old) with their own family income in 2011-12 (when they were between 29 and 32 years old).