Heterogenous latent factor models using horizontal kinship

We reconstruct the genealogical tree of all individuals ever appearing in Dutch municipalities records since 1995. Using microdata from tax authorities, we compute a measure of their permanent earnings and assess the degree to which the intergenerational transmission process is heterogeneous. Our analysis relies on traditional estimates as well as model assuming a latent transmission of family endowments. In both cases, we show that offspring born into families belonging to the lowest percentiles of the income distribution show a higher degree of intergenerational persistence. The same applies when looking at heterogeneity in intergenerational mobility along the grandparental wealth, potentially suggesting the existence of poverty traps.