Upward mobility (the movement of a person from a lower socio-economic class to a higher class, or from lower-income to higher-income, or from lower-wealth to higher-wealth) tends to be much lower than many of us think. Income mobility is also closely related to income inequality, as demonstrated by cross-country data in what is known as the 'Great Gatsby curve':
This Great Gatsby curve (taken from Wikipedia) shows a positive relationship between inequality (on the x-axis) and intergenerational immobility (on the y-axis). Immobility is, of course, the opposite of mobility, so this curve demonstrates a negative relationship between inequality and income mobility. Countries that have higher inequality have less income mobility. In other words, high inequality today tends to lock in high inequality in the future, and that's probably not a preferable outcome. At the least, it inhibits merit-based success from driving upward mobility.
The persistence of intergenerational immobility is related to inequality in social status. So, I was interested to read this new NBER Working Paper (ungated earlier version here) by Valerie Michelman (University of Chicago), Joseph Price (Brigham Young University), and Seth Zimmerman (Yale University). They looked into the effects of old boys' clubs at Harvard, how those clubs shape upward mobility, and whether interaction with high-status peers can increase the chance of upward mobility. Before I get to the results, here is how Michelman et al. briefly introduce Harvard's final clubs:
Social life at Harvard centered on exclusive organizations known as final clubs, so-called because they are the last clubs one joins as a Harvard student. These clubs, which Amory (1947) describes as the “be-alls and end-alls of Harvard social existence,” are hundreds of years old and count among their members multiple US Presidents.
Michelman et al. collect administrative data on Harvard entering classes from 1919 to 1935, including home addresses, where they dormed at Harvard, club membership, and academic rank. They match those records to 25th Reunion class reports, and where possible to data from the Census. A key feature of the dataset is that room assignments were effectively random, so students could not choose the 'neighbourhood' in which their room was located. The price of rooms varies, so the average price of each neighbourhood varies as well. More expensive neighbourhoods would include more high-status students, being those who went to 'private feeder schools', than less expensive neighbourhoods. Michelman et al. use this randomisation to compare students who dormed in these differently-priced neighbourhoods in terms of outcomes at Harvard and afterwards.
The paper has a huge amount of detail, but in short, they find that:
...exposure to high-status peers helps students achieve social success in college, but that overall effects are driven entirely by large gains for private feeder students. A 50 percentile shift in the room price distribution raises membership in selective final clubs by 3.2 percentage points in the full sample (34.2% of the mean). For private feeder students, the same shift raises membership by 8.4 percentage points (37.8%), while effects for other students are a precise zero. These effects build on similar patterns we observe starting in students’ first year at college. A 50-percentile increase in neighborhood price raises the count of first-year activities by 11.2% overall, with larger gains for private feeder students and small, statistically insignificant effects for others. Looking across activities, effects are largest for leadership roles, where baseline gaps in participation by high school type are also largest.
In other words, interacting with high status peers encourages more social activities, including final club membership, but only among students who are already high status. Score one for immobility. They also find that:
25 years after graduation, a 50 percentile change in peer neighborhood price raises the chance that students participate in adult social organizations by 8.7%. As with on-campus clubs, the overall long-run effects are driven entirely by large gains (26.1%) for private feeder students, with near-zero effects for others.
The social club effects observed while students are at Harvard persist into adulthood. They also affect incomes and social status:
Turning to occupations, a 50 percentile change in neighborhood price rank raises the share of private feeder students in finance by 7.2 percentage points, 39.7% of the group mean.
For high status students, interacting with other high status students is in turn associated with high-income careers in finance. Importantly, none of this is driven by academic performance. The high status students from private feeder schools consistently perform significantly worse than other students in terms of academic rank.
All of this analysis is based on data from Harvard students from the 1920s and 1930s. Surely things have improved since then? Michelman et al. collect data from more recent cohorts (although not in as much detail) up to the class of 1990, and find that:
Harvard changes profoundly over this time, enrolling women and many more non-white students. However, cross-group differences in academic performance persist. Public feeder students outperform private feeder students and Jewish students outperform Colonial students over the full 1924-1990 period. Differences in career outcomes change shape. Finance career choices by high school type and ethnicity converge, while gaps in academic careers and MBA receipt emerge, and gaps in medical careers remain large. Overall, students from high-income families at elite universities continue to earn more than other students at those universities.
So, maybe there are some cracks beginning to show in the upward immobility of students at Harvard. However, the persistent post-graduation income differences between high status students and other students remain. Clearly, social groups continue to matter greatly.
[HT: Marginal Revolution]
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