Does Family Really Matter? - Sibling Correlations in Permanent Economic Outcomes in Germany

Abstract

Contributing to a growing literature on sibling correlations, this paper is the first to present results for Germany. On the basis of data from the GSOEP, around one third of the variance or inequality in permanent earnings for men and around one fourth for women can be attributed to family characteristics during childhood. This indicates a slightly lower influence of family on women’s outcomes. The estimates rise when based on family income, indicating that for men half of the inequality in actual family income is due to family background. For women the estimate is around 0.4, which is also a clear rise but still indicates higher mobility for women than for men. The correlations in hours worked are around one third for men and around one fifth for women. A comparison with the United States shows a higher degree of intergenerational mobility for men in Germany than in the US, which is in line with recent results on intergenerational mobility based on earnings elasticity. This disappears entirely when the estimates are based on family income and hours worked. With family income as a broader measure of a household’s economic power than individual earnings, my results show that men in Germany and the US face a similar level of intergenerational mobility. The results for women are even more similar for the two countries, leading to the conclusion that based on sibling correlations there is no significant difference between Germany and the US as regards intergenerational mobility.