PT  - JOURNAL ARTICLE
AU  - Grawe, Nathan D.
TI  - Reconsidering the Use of Nonlinearities in Intergenerational Earnings Mobility as a Test for Credit Constraints
AID  - 10.3368/jhr.XXXIX.3.813
DP  - 2004 Jul 01
TA  - Journal of Human Resources
PG  - 813--827
VI  - XXXIX
IP  - 3
4099  - http://jhr.uwpress.org/content/XXXIX/3/813.short
4100  - http://jhr.uwpress.org/content/XXXIX/3/813.full
SO  - J Hum Resour2004 Jul 01; XXXIX
AB  - Intergenerational earnings regression among Canadian men is nonlinear; middle-earning families experience slower regression. This pattern appears to confirm economic models of educational choice with credit constraints. This paper reexamines the economic model and finds no connection between credit markets and earnings regression nonlinearities. In particular, credit constraints need not produce concavity and concavity does not imply credit market failure. Despite the invalidity of the test, data availability will likely lead to continued research along this path. The paper proposes an amended test using quantile regressions. Applied to Canadian data, the simple liquidity constraint conclusion is rejected.