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Title page

Contents

Abstract 3

1. Introduction 4

2. Data 6

3. Results 7

3.1. Population average estimates 8

3.2. Nonlinearity and the role of education and employment 11

3.3. The "residual" component and the role of capital income 15

3.4. Transfer income and nonlinearities 18

4. Discussion and conclusion 20

References 22

Appendix 32

A. Additional results (for online publication only) 32

B. Data construction (for online publication only) 48

C. Nonlinear mediation analysis (for online publication only) 52

Tables

Table 1. Linear IGE estimates 27

Figures

Figure 1. Local associations between children's and parents' market income 28

Figure 2. Child education and employment by parental market income 29

Figure 3. Child market income and IGEs by parental market income 30

Figure 4. The role of transfer income in the IGE 31

Appendix Tables

Table A.1. Linear IGE estimates adjusted for gender and birth cohort 32

Table A.2. Linear IGE estimates - decomposed by sequential controls 33

Table A.3. Linear rank-rank estimates 34

Table B.1. Sample selection 50

Table B.2. Summary statistics: Income, education, employment 51

Appendix Figures

Figure A.1. Robustness to income threshold: Nonlinear IGEs and decomposition 35

Figure A.2. Robustness to timing of children's income measurement - child age 34-37: Nonlinear IGEs and decomposition 36

Figure A.3. Robustness to timing of parents' income measurement: Nonlinear IGEs and decomposition 37

Figure A.4. Decomposition of the nonlinear IGE by education and employment - narrower bandwidth 38

Figure A.5. Comparing variation in estimated income mobility within Denmark to variation found across non-Western countries on average 39

Figure A.6. Sequential decomposition of the nonlinear IGE by education and employment 40

Figure A.7. Nonlinear decomposition of mobility using rank-rank and upwards mobility estimates 41

Figure A.8. Value of stocks and bonds by child age and parental income 42

Figure A.9. The role of transfer income in the IGE 43

Figure A.10. Amount and share of children with incomes 〈$1 by parents' income 44

Figure A.11. Decomposition of the nonlinear IGE by education and employment - student exclusion and employment definition 45

Figure A.12. Decomposition of the nonlinear role of child education and employment (δ) for the market income IGE into the association between parental income... 46

Figure A.13. Decomposition of the nonlinear role of child education and employment (δ) for the gross income IGE into the association between parental income... 47