Bridges

Bridges Fall 2016

Bridges is a quarterly review of regional community and economic development issues, projects and regulatory changes for practitioners from community-based organizations, as well as for Community Reinvestment Act officers, academics and government of

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I N D E X T H E F E D E R A L R E S E R V E B A N K o f S T . L O U I S | C E N T R A L T O A M E R I C A ' S E C O N O M Y F A L L 2 0 1 6 cdac spotlight What Next? Succession Planning for Nonprofits 5 8 10 Memphis Fights Blight: Collaborating to Win the Battle Against Vacant and Abandoned Property Teach For America: An Economic Boost for Rural Mississippi Delta Communities >> continued on Page 3 By Raj Chetty T he American dream is a com- plicated concept, but I'd like to distill it down to a simple statistic that we are able to measure with data: the probability that a child born to parents in the bottom fifth of the income distribution makes the leap all the way to the top fifth of the income distribution. In the United States, children born to parents in the bottom fifth of the income distribution have a 7.5 percent chance of reaching the top fifth. at compares with about 9.0 percent in the United Kingdom, 11.7 percent in Denmark, and 13.5 percent in Can- ada. When some people initially see these numbers, they sometimes react by saying, "Even in Canada, which has the highest rates of upward mobility, the rate of success doesn't look all that high. You only have a 13.5 percent chance of reaching the top if you start out at the bottom." It is important to remember that, unfortunately, no Improving Opportunities for Economic Mobility New Evidence and Policy Lessons matter what you do, you can't have more than 20 percent of people in the top 20 percent. As such, these differ- ences are actually quite large. One way to think about it is this: Your chances of achieving the "American dream" are almost two times higher if you're growing up in Canada relative to the United States. ese differences across countries have been the focus of much policy discussion. But what should also be given attention is that upward mobil- ity actually varies substantially even within the United States. In recent work, my colleagues and I calculate upward mobility for every metro and rural area in the United States using anonymous earnings records on 40 million children and their parents (Chetty et al. 2014). What results from that analysis is a map (Figure 1) that shows the geogra- phy of intergenerational mobility in the United States. In this map, we're com- puting the same statistic mentioned previously: your chances of reaching the top fifth of the national income distribution conditional on starting in the bottom fifth for 741 metro and rural areas in the United States. What you can see in this map is that there is substantial variation in the United States. For places in the top decile—the lightest colored places on this map—your odds of reaching Economic Mobility: Research & Ideas on Strengthening Families, Communities & the Economy This new publication released by the Federal Reserve Bank of St. Louis and the Board of Gover- nors of the Federal Reserve System includes papers originally presented at the ninth biennial Federal Reserve System's Community Development Research Conference, including this article by Raj Chetty. The authors of the essays in this volume explore a range of issues and concepts central to understanding how—and how well—people are able to move economically. Visit the publication's webpage on the St. Louis Fed's website to view each article separately or download the entire book: www.stlouisfed.org/community- development/publications/economic-mobility.

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