Great Gatsby CurveEdit
The Great Gatsby Curve is a term used in political economy to describe a recurring empirical pattern: countries (and sometimes regions) with higher levels of income inequality tend to have lower intergenerational mobility. In practical terms, children born into poorer families in more unequal societies are more likely to remain poor as adults than children born into similar backgrounds in more equal societies. The idea has been widely discussed by economists and policy analysts as a way to connect the dynamics of growth with the chance for upward mobility across generations. See for example discussions by Alan Krueger and subsequent analyses that compare mobility with measures of inequality such as the Gini coefficient and various indicators of economic opportunity. The concept hinges on measurements of intergenerational mobility and the degree of inequality faced by families across generations, using data drawn from many different countries and time periods.
Origins and definition
The label Great Gatsby Curve emerged from discussions of how income distribution and opportunity relate to each other across countries. At the heart of the curve is a simple scatterplot: on one axis, a common measure of inequality (for example, the Gini coefficient or other inequality metrics); on the other axis, a measure of intergenerational mobility (often expressed as the intergenerational elasticity of income or similar statistics). A positive slope indicates that higher inequality coincides with lower mobility. The name itself evokes the novel’s theme of wealth, status, and social closure, signaling how advantages can beget further advantages in societies with stark economic disparity. See intergenerational mobility for a closely related concept and inequality for background on the distributional dimension.
A number of researchers have contributed to the use and interpretation of the curve, including prominent figures in policy discussions and academia who compare cross-country data and track changes over time. Notable names in the literature include Miles Corak, who has written about mobility across generations, and Branko Milanovic, who has explored global patterns of inequality and opportunity. The idea has been discussed in relation to education policy and the provision of public goods that influence children’s outcomes, as well as to broader questions about how policy environments affect incentives and growth. See intergenerational mobility and income inequality for related discussions.
What the curve is and is not
What it shows: A robust pattern in many datasets is that societies with larger gaps between the rich and the poor tend to exhibit less mobility for that next generation. In other words, a family’s starting point in a high-inequality society has a stronger association with the family’s later economic position than in a low-inequality society.
What it does not prove: The curve is correlational, not causal. A steeper or flatter curve can reflect multiple underlying forces, including historical developments, institutions, education systems, geographic sorting, family structure, tax and transfer design, and overall economic dynamism. See discussions under causality and economic growth for how policy environments can shape both inequality and mobility.
What it invites policymakers to consider: If the goal is to expand opportunity without compromising growth, the curve suggests paying attention to the channels through which opportunity is transmitted—education quality, access to opportunity, and the conditions that allow families to invest in the next generation. See education policy and early childhood education for related policy areas.
Interpretations from a market-friendly perspective
From a perspective that emphasizes merit, personal responsibility, and growth through competition, the curved relationship is a call to focus on the structural elements that enable opportunity:
Education quality and access: School quality, parental engagement, and access to information about opportunities can help children from all backgrounds compete on merit. Policy emphasis tends to favor school funding regimes that reward results and expand access to high-quality schooling, including parental choice and accountability measures. See education policy and early childhood education for related discussions.
Growth-oriented policy environment: A dynamic economy with robust growth tends to create more opportunities for mobility by expanding the size of the economic "pie" and by broadening the range of potential pathways out of poverty. The focus is on reducing barriers to entrepreneurship, investment, and work, while maintaining fair competition. See economic growth and labor market policy for connected topics.
Targeted supports vs. broad redistribution: A market-oriented approach often prefers targeted investments in opportunity—such as early childhood programs, skill development, and work incentives—over broad, higher-rate redistribution. The aim is to raise the returns to effort and talent without dampening incentives that drive innovation and productivity. See tax policy and public policy for context.
Family structure and social norms: Policies that support stable family formation and parental engagement can influence long-run mobility, though the emphasis remains on expanding opportunity rather than dictating outcomes. See family policy and social policy for related considerations.
Measurement caveats and competing interpretations
Cross-country comparisons are tricky: Data quality, cohort selection, and differences in measuring mobility and inequality across countries can affect the shape of the reported curve. Analysts stress the importance of consistent definitions and careful interpretation. See data quality and cross-country comparisons for methodological discussions.
Causality is elusive: Even when a robust association is observed, establishing that inequality causes lower mobility—or that mobility issues drive inequality, or that both are driven by a third factor—remains debated. Some studies emphasize institutional or cultural drivers (governance, rule of law, geography, or historical factors) as underlying influences. See causality and institutions for related debates.
Variations over time and place: The curve is not a universal law; some high-inequality societies still display meaningful mobility, while others with lower measured inequality show persistent barriers to mobility for certain groups. This heterogeneity underscores the need to identify levers that work in particular contexts. See institutional economics and policy evaluation for broader discussion.
Controversies and debates (from a market-friendly, opportunity-focused view)
On policy implications: Critics worry that using the curve to justify heavy-handed redistribution could undermine incentives and long-run growth. Proponents counter that well-designed investments in human capital and competition-enhancing reforms can lift mobility without sacrificing efficiency. The debate centers on which policies best expand opportunity, how to balance fairness with growth, and how to measure success over time. See policy debate and public finance for contrasting perspectives.
On the left’s critiques of the curve: Some critics argue that inequality and mobility are shaped by structural discrimination and historical injustice, and that addressing these requires broad-based social reforms. In response, proponents of a merit-based, growth-oriented approach argue for targeted interventions that improve the returns to talent and effort, while avoiding disincentives to work and investment. They may contend that the best path to greater mobility includes removing barriers to entry in education and markets rather than pursuing equality of outcomes as a primary objective. See racial inequality and education equity for connected discussions.
Why some criticisms of the curve miss the point: Critics sometimes treat the curve as if it prescribes specific policy conclusions in every context. Supporters of the growth-and-opportunity view emphasize that the curve is a diagnostic tool, not a blueprint, and that the most effective reforms are those proven to expand real opportunity—education quality, parental empowerment, and a stable, growth-friendly regulatory environment—without unnecessary penalties on productive activity. See policy evidence and evaluation for related considerations.
See also