| Hello, Leitor Today we will talk about the central theme and IMDS’s raison d’être: social mobility. It is a complex subject, and this characteristic begins with the varied ways of measuring mobility. Unlike various phenomena, the way of measuring denotes very different messages. Take the example of intergenerational mobility of income: here, one can compare the income of the child (or daughter) with the father's income and measure the percentage of people from a generation who has a higher income than their parents. Since the two generations are compared at different points of time (when they were the same ages), this indicator informs about the growth of the general purchasing power of society between two subsequent generations. If a country grows relatively inclusively over time, it is natural that a large fraction of children should earn more than their parents. In the United States, among those born in 1984, only 50% earned at the age of 30 more than their parents did at that same age. Absolute mobility has fallen substantially there. For children born in 1940, 90% earned more than their parents (see here). Another aspect of this measure is its composition. We can imagine a country where 70% of children earn more than their parents and 30% earn less. If those 30% are all children of poor parents, then that is a problem. The same statistics would not be a problem if the 30% of children who earn less than their parents were randomly distributed among income brackets (of the parents). In the United States, the drop in absolute mobility has been concentrated more among the middle class (see here). In Brazil, we do not have any public database with income observations of parents and children. We can use similar statistics using parents' and children's schooling, which is done from two special supplements from the National Household Sample Survey (PNAD), conducted in 1996 and 2014. This is an important measure because schooling is highly correlated with an individual’s income throughout life -- which in economics is referred to as permanent income. Indicators calculated by the World Bank and systematized by the IMDS (here) show that, for the generation of children born in the 1980s, 84.2% of them had more schooling than their parents. Only five countries (out of 140 listed by the World Bank) had a higher rate than Brazil: Taiwan, South Korea, Maldives, Thailand, and Malaysia. This shows advances in education which should have an impact on income, but there is no guarantee that these advances occur among the children of less educated parents. Statistics of this nature are called absolute mobility statistics. The first, of income, and the second, of schooling. A second concept of mobility is the so-called ranking (or position) mobility. The lower the correlation between the father's ranking and the child's ranking, the greater the social mobility of the ranking. For example, we say that there is a complete absence of ranking mobility when children repeat the relative position of parents in the income ranking. What is usually done is to estimate in a least square regression the coefficient associated with the father's ranking in a regression that has the child's ranking as a dependent variable. This coefficient will always be between zero and one: the unit meaning that the father's ranking is 100% associated with the child's ranking (i.e., complete absence of social mobility), and zero meaning the absence of association between the rankings (maximum social mobility). In the United States, this coefficient is 0.313 for the generation of children born between 1979 and 1982 and has been stable since the generation born in 1970 (see Figure 1 here). In Brazil, this calculation cannot be done with the available IBGE data, but a recently prepared study brings together the bases of administrative records of the Single Registry, the RAIS and, more importantly, Income Tax, to try to estimate some social mobility measures. A beta regression coefficient of 0.54 was found for those born between 1988 and 1990 (see here). This points to a lower ranking mobility in Brazil than in the United States. That is, the association between the income ranking of children and parents is stronger in Brazil than in the United States. A country that has high ranking mobility and absolute low mobility is economically stagnant, because the well-being of children does not advance in relation to their parents, although the status of parents does not influence that of their children. Absolute income mobility has to do with long-term growth and depends on solid macroeconomic and microeconomic fundamentals. Fiscal responsibility, competition protection (in all markets) and respect for contracts and individual freedoms are necessary conditions for long-term growth and sustainable family progress (see here, for example). Ranking mobility, in turn, is associated with a list of public policies that promote the full development of cognitive and socio-emotional capacities of children and young people, support the family as a central element of human formation and ensure a broad social security network that protects individuals and families from claims (income and health, especially), with long-term effects (see "IMDS Letter" of November 2). See you in the next “IMDS Letter”! Paulo Tafner, CEO | 
