Abstract:
How should the correlation between the earnings of parents and children in South Africa be
calculated in the presence of high unemployment, and what is the role of education in determining
this relationship? We use the first four waves of the National Income Dynamics Study (NIDS) for
2008 to 2014/15, and the 1993 Project for Statistics on Living Standards and Development (PSLSD) to investigate the shape of the association between parental and child earnings across the earnings
distribution, and find that the correlation is strongest at the ends of the distribution. We correct for
possible biases that arise from co‐resident parent‐child pairs, and from selection into labour market
participation in South Africa’s high‐unemployment society. We find that correcting for selection into
employment increases the intergenerational elasticity of earnings by approximately 10 per cent. We
unpack the role of education in determining the association of intergenerational earnings and find
that the impact is strongest at the bottom of the earnings distribution, and that education accounts
for approximately 40 per cent of the total intergenerational earnings elasticity.
