EconTalk Raj Chetty on Economic Mobility
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Aug 22, 2022 Raj Chetty, an economist from Harvard and director of Opportunity Insights, discusses groundbreaking research on economic mobility. He reveals that poor individuals connected to diverse social networks have better financial outcomes than those limited to similar economic backgrounds. Chetty explores the implications of community ties on children's long-term prospects and critiques the current state of the American Dream. He addresses the significance of policy changes to combat economic segregation and enhance opportunities for low-income families.
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Economic Connectedness and Mobility
- Poor people with rich friends experience greater financial mobility.
- This "economic connectedness" is a strong predictor of success.
Community-Level Effects
- Chetty clarifies that his study focuses on community-level trends, not individual friendships.
- Neighborhoods with greater economic connectedness show higher mobility, not necessarily individuals with rich friends.
Magnitude of Economic Connectedness
- Economic connectedness has a substantial impact, potentially increasing low-income kids' future income by 20%.
- This effect persists even when controlling for poverty, inequality, and segregation.