The effects of intergenerational income mobility and per pupil education spending on economic growth

Intergenerational income mobility is often studied in the context of inequality, but it also plays a critical role in long-term economic development. This study introduces an endogenous growth model to explore how intergenerational income mobility affects macroeconomic growth. In the model, individuals earn wages based on their education and skills, with the accumulation of human capital influenced by inherited abilities, as well as public and private educational investments. A key finding is that economies that allocate more resources to primary and secondary education achieve higher levels of both absolute and relative income mobility, signaling a better alignment of individuals with suitable occupations. This increased mobility, in turn, drives greater economic growth and higher educational attainment. The results highlight intergenerational mobility as a crucial factor for economic growth, providing valuable insights for public policy design. This study makes a significant contribution to understanding the macroeconomic consequences of intergenerational income mobility, particularly in the context of public education investment. By developing an endogenous growth model that integrates multiple regional economies, this study demonstrates that higher spending on K-12 education enhances both absolute and relative intergenerational income mobility. This increased mobility leads to more efficient talent allocation, higher college attainment rates, and ultimately, faster economic growth. The model’s predictions are empirically validated using U.S. commuting zone data, reinforcing the relevance of its findings. The study also highlights the redistributive benefits of centralized education finance policies in reducing regional inequality and promoting long-term economic performance. These insights provide strong theoretical and empirical foundations for policy interventions aimed at improving opportunity equality through public education investment.