Does Income Mobility Equalize Longer-Term Incomes? New Measures of an Old concept

It has long been recognized that cross-sectional distributions of economic well-being (hereafter referred to as "income") provide an incomplete and perhaps distorted picture of longer-term economic well-being. In any given year, people may have incomes which are transitorily high or low for reasons such as unemployment, illness, youth, good or bad luck, or exceptional economic events. As Joseph Schumpeter once put it, the distribution of incomes is like the rooms in a hotel Ð always full but not necessarily with the same people (Sawhill and Condon, 1992). Economic mobility studies provide information about changes of people among rooms and changes in the rooms themselves. One of the primary motivations for economic mobility studies is to gauge the extent to which longer-term incomes are distributed more or less equally than are single-year incomes. For instance, Shorrocks (1978) has said: "Mobility is regarded as the degree to which equalization occurs as the period is extended. This view captures the prime importance of mobility for economists. " Atkinson, Bourguignon, and Morrisson (1992) write in a similar vein: "One of the reasons why mobility is of interest is that it reduces inequality in the lifetime sum of earnings relative to that in a single period.&quot