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Jumping off of the Great Gatsby curve: how institutions facilitate entrepreneurship and intergenerational mobility

Published online by Cambridge University Press:  06 February 2014

CHRISTOPHER J. BOUDREAUX
CHRISTOPHER J. BOUDREAUX*
Affiliation:
Department of Economics, Florida State University, 113 Collegiate Loop, Tallahassee, FL 32306, USA
*
*Email: cjb09f@my.fsu.edu
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Abstract:

Income inequality is often attributed to declines in income mobility following the Great Gatsby curve, but this relationship is of secondary importance in determining the factors of income mobility if one considers that changing rules is more important than changing outcomes under defined rules. Rather, improvements in institutional quality are hypothesized to increase income mobility by allowing entrepreneurs the freedom to pursue their dreams. This paper is the first to empirically analyze the institutional determinants behind entrepreneurship, and their effect on income mobility. The findings from a cross-country analysis suggest that secure property rights and less corruption are associated with less income persistence, leading to higher income mobility, independent of the Great Gatsby effect. This suggests that reducing corruption and protection of property rights increase income mobility through the channels of entrepreneurship.

Type
Research Article
Information
Journal of Institutional Economics , Volume 10 , Issue 2 , June 2014 , pp. 231 - 255
Copyright
Copyright © Millennium Economics Ltd 2014 

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