What are the determinants of inequality? The first step in answering this question is defining exactly what we mean by inequality. A working paper by Chetty, Hendren, Kline, and Saez takes an interesting approach: it measures inequality based on the likelihood that a child born into a poor family will rise in the overall income distribution.
They call this measure “absolute upward mobility.” If absolute upward mobility is high, it means a child born into a poor family has a good chance of rising in the overall income distribution. If it is low, that means the poor child will likely be poor when she grows up.
The authors construct upward mobility for different cities. A city with a high score is considered more equal; a child born to a relatively poor family in the city has a good chance of rising in the income distribution. A city with a low score is more unequal, as a poor child is likely to remain poor as an adult.
The part of the study that interests us most is the correlation between their measure of inequality and other variables at the city level. In other words, what characterizes the most “unequal” cities?