Stone Center’s inaugural director talks about economic mobility

Prof. Steven Neil Durlauf wants center to be champion of research into wealth inequality

In September 2022, Prof. Steven Neil Durlauf became the inaugural director of the new James M. and Cathleen D. Stone Center for Research on Wealth Inequality and Mobility. The Steans Professor in Educational Policy at the Harris School of Public Policy, Durlauf conducts research on an array of economic topics, focusing on poverty, inequality and the theory of policy design. 

His scholarship emphasizes the interaction of individuals, their families, and the broader political landscape driving inequality. This work underpins the research agenda of the Center, which is working toward a comprehensive understanding of how multiple dimensions – education, class, occupation, income, wealth, and others – contribute to socioeconomic mobility. The center's research agenda has a particular focus on intergenerational mobility. 

In this Q&A, Professor Durlauf, also a fellow of the American Academy of Arts and Sciences, discusses his latest research on the impact of parental income on children's outcomes, social immobility in the U.S. and how mobility might be accelerated. 

Several months in, how would you describe the atmosphere at the Stone Center? 

The atmosphere is a combination of excited, exhausted, and in the moment. It's obviously a complicated thing to set up a center, but we've been able to already get several activities underway, thanks largely to the Center's talented Executive Director, Grace Hammond

First, the Stone Center will be co-sponsoring summer schools for graduate students and young faculty members in China and South Korea this summer that will be focused on inequality. We hope that these will lead to longer-term collaborations. 

Second, I will organize a series of workshops and conferences with two distinguished scholars—physicist Jean-Philippe Bouchaud of the Collège de France and economist Tao Zha of the Federal Reserve Bank of Atlanta—on wealth inequality. Our objective here is to organize a sequence of conferences to explore transdisciplinary understandings of wealth dynamics. 

Third, the center will be hosting a conference this November at the Harris School on new ways to measure intergenerational mobility. In addition to putting the conference together in collaboration with the University of Michigan's Stone Center, we're going to produce a special issue on the empirical methodologies for intergenerational mobility, which will be published in Sociological Methods & Research, the leading sociology journal for technical work. 

You and three colleagues recently completed research on the impact parental income has on intergenerational mobility. What were the highlights? 

Yoosoon Chang, Seunghee Lee, Joon Park, and I are involved in a long-term research project to determine what exposures and experiences between childhood and adolescence are predictive of adult outcomes. The area we focused on in our first paper is how marginal changes in parents' income at each age of their offspring's lives affect the permanent income of those offspring later in life. What we found was that parents' incomes in middle childhood and adolescence have larger marginal effects than incomes in early childhood. Our paper reveals that average or permanent parental income is not the only thing you want to know about income's impact. 

What we may be finding is that parents' incomes contribute to their capacity to locate their children in neighborhoods and schools that favorably impact inter-generational mobility in a more powerful way than higher income might when the children are very young. It may also be the case that the U.S. simply does a better job providing a social safety net for early childhood than it does for teenagers. I think the findings do mean it is important to revisit the claims that early childhood has more bang for its buck. 

Regardless of what family income might indicate, it still is only one component in that mobility. We also need to know the family structure, the neighborhood somebody lives in, and the schools they attend constitute dimensions of the trajectories of experiences of children and adolescents. Ultimately, we want to uncover the panoply of family and social exposures that are predictive of future outcomes. This research—an analysis of incomes—is a first step. 

How does the U.S. compare to other advanced, wealthy economies in the area of social mobility? 

In general, in cross-country comparisons, the U.S. does not look especially mobile among those economies. But I would make an important caveat, which is that to really answer that question, you need to consider the heterogeneity of experiences within populations. This is essential. What are the experiences of immigrants in the U.S. compared to those elsewhere? What about the experiences of communities of color? 

It seems surprising that the U.S., known worldwide as a land of opportunity, would be more socially immobile than similar countries. Why is that happening? 

Disagreements certainly exist on that, but a key feature of American immobility is a relative lack of generosity to those who are disadvantaged and, frankly, just the way our system is structured. America's decentralized funding of public education is a concrete example. The disparities among school districts here don't exist in countries that handle funding at a centralized level. 

Another explanation that clearly matters is the tax system. In other countries, you have more redistribution than you do in the U.S., with its less progressive system and lower rates. 

A more complex factor is something I call the membership theory of inequality. Think about all the memberships you have in different socioeconomic and political groupings that influence your life. The most obvious one is the family, but many other memberships exist, too: the neighborhood you lived in, schools you attended, friendship networks, and people with whom you work are other important dimensions of memberships. Then think about categories that help define you: gender, ethnicity, religion potentially. These memberships are essential dimensions along which our society is constituted in ways that the social determinants of socioeconomic outcomes are amplified to exacerbate immobility. 

From this vantage point, racial and income segregation interact to play key roles in determining mobility and persistence across generations. 

Is economic mobility improving in the U.S.? 

Over the last 60 years, I'd say absolutely—the most important reasons being deep, profound changes resulting from the Civil Rights Act and Voting Rights Act. In terms of efforts to measure changes in mobility in the last 30-40 years, I think limited evidence by very good researchers suggests that mobility has slowed down, but I wouldn't say the evidence is incontrovertible. Another dimension of mobility is gender. Opportunities for women have profoundly changed in the United States.  

So, one must say that for people of color and women dramatic improvements have occurred, which does not mean that no other changes are warranted or that we have achieved equalization of opportunities. 

If people were to look at your most recent paper and consider the policy implications, what policies might they look at? 

The paper is about measurement, but my co-authors and I have some conjectures with policy implications based on the trajectories work. The importance of parental income during their children's adolescence is one I mentioned. In our paper, we found that, with respect to income, the interaction pattern is complicated. Within early childhood and adolescence, incomes act as substitutes, while incomes between early childhood and later adolescence are complements. Intuitively, this means that the effect of a dollar in one year of early childhood or later adolescence is smaller if adjacent years have higher incomes but higher incomes in early childhood and late adolescence have larger effects when the incomes are higher in the other time periods. 

Where would you like to see the center in five years? 

I would like it to be a leading center for transdisciplinary inequality research in which economists, sociologists, and psychologists, in particular, are integrated in focusing on the same questions. Certain things I see help me appreciate that the perspectives of sociology and psychology are essential in this work. Economists may know how to write mathematical models and how to integrate them with other phenomena in a way that reflects our comparative advantage. But the ideas are essentially psychological and sociological. So, we really want the Center to be a champion of research that focuses on phenomena and not on fields, disciplines, or particular perspectives. 

This story originally appeared on the Harris School website