Turkey and The Great Gatsby Curve

Author: Emre Deliveli  ·  January 27th, 2012  ·  1250http%3A%2F%2Fwww.economonitor.com%2Femredeliveli%2F2012%2F01%2F27%2Fturkey-and-the-great-gatsby-curve%2FTurkey+and+The+Great+Gatsby+Curve2012-01-27+16%3A43%3A33Emre+Delivelihttp%3A%2F%2Fwww.economonitor.com%2Femredeliveli%2F%3Fp%3D1250 › Share This Print

Below is my latest Hurriyet Daily News column, which you can also read at the Daily News website.

I have an addendum coming up very soon, hopefully today, where I will summarize the blogosphere debate.  But before that I should note that there is a new version of The Great Gatsby coming up to the silver screen, in 3D nonetheless. But die-hard fans are not very happy about it. Anyway, on to the column, old sport:

A graph in a recent presentation by U.S. Council of Economic Advisers Chairman Alan Krueger created a lot of buzz in the economics blogosphere last week. Originally from a paper by University of Ottowa’s Miles Corak, it shows a negative relationship between the Gini coefficient and intergenerational earnings elasticity.

The Gini coefficient is a standard way of measuring inequality. It is an index between 0 and 1, based on the Lorenz curve, which is the proportion of the total income earned by each percent of the population. The larger the number, the less equal the society.

Intergenerational earnings elasticity is the relationship between parents’ earnings and those of their children. In a way, it shows if children can escape their parents’ poverty. According to the 1921 song by Van & Schenck, immortalized in F. Scott Fitzgerald’s The Great Gatsby, they can’t: “The rich get richer and the poor get children.”

Now, you know why Krueger dubbed the graph “The Great Gatsby Curve”. Without making any claims of causality (although the relationship is based on solid theory), it shows that more unequal countries have less generational earnings mobility, i.e., if your parents were poor, you are likely to be, too.

As soon as I saw this graph, I wondered where Turkey would be on it. Turkey’s 2010 Gini, as released by the Turkish Statistical Institute in December, is 0.40- quite unequal, but not as bad as South Africa or America. However, I could not find a single paper that calculated intergenerational earnings elasticity for the country. Conversations with half a dozen well-known Turkish labor economists confirmed that there is indeed no such study.

That’s a pity, but I am sure the elasticity would not be as low as the one calculated in a paper about immigrants in Sweden. That study, which looks at the earnings of parents and their children, finds that social mobility is higher for Turkish immigrants compared to other ethnicities in Sweden. Therefore, we cannot say that Turkish culture is resistant to social mobility per se.

Luckily, there is a lot of research on educational mobility in Turkey. For example, Istanbul think-tank Betam has found that fathers’ education has a positive impact on high school children’s PISA test scores. In their ongoing research for Sabancı University’s Education Reform Initiative, they also discover that, even after controlling for parents’ income, scholastic achievement and regions, parents’ education has a positive impact on the probability of continuing on from eighth to ninth grade.

While these results point to a low degree of educational mobility, Turkey scored in the middle of the pack in a recent study of this phenomenon in OECD countries.  However, inequality manages to play a role again: The same study notes that “in countries with large inequalities in students’ socio-economic background, including Mexico, Portugal, Luxembourg, Spain, and Turkey, even a relatively mild influence of background on students’ achievement leads to large overall educational persistence across generations.”

It seems that the gap between rich and poor has a more sinister side in terms of hindering social mobility, old sport.