Correlation of Brothers' Earnings and Intergenerational Transmission

We estimate sibling correlations and intergenerational transmission of life-cycle earnings within a unified framework that nests previous models. Using data on the Danish population of father/first-son/second-son triads we find that intergenerational effects account for 72 percent of sibling correlations. This share is higher than in previous studies because we allow for heterogeneous intergenerational transmission between families. For the first time we show significant U-shaped life-cycle variation in sibling correlations, consistent with human capital models. Estimates of intergenerational mobility are of greater value than previously thought for understanding the role of the family in explaining earnings inequality.