Raj Chetty on Economic Mobility

Raj Chetty joins Russ Roberts to discuss his research on what drives economic mobility in America, with a particular focus on a recent study published in Nature that identifies economic connectedness—the degree to which low- and high-income people interact within a community—as a surprisingly strong predictor of upward mobility. The conversation moves between Chetty's empirical findings, their policy implications, and methodological questions about how economists verify causal claims. Central to the discussion is the measurement of cross-class friendships using privacy-protected Facebook data on 72 million Americans, and the argument that economic connectedness matters more than poverty, inequality, or segregation alone in determining whether children escape their starting income.

The conversation covers several distinct findings and tensions. Chetty argues that segregation appears driven by removable barriers—information gaps, difficulty navigating housing markets—rather than deep preference, as demonstrated by the Seattle Creating Moves to Opportunity experiment, where a $2,500 counselor intervention raised moves to high-opportunity neighborhoods from 15% to 60%. He estimates that closing the connectedness gap would raise low-income children's adult incomes by roughly 20%, though acknowledges this is not a determinant of fate; zip code alone explains only 5–10% of individual outcomes. The discussion also addresses the decline in absolute upward mobility across generations—from roughly 90% of children born in the 1940s–50s earning more than their parents, to about 50% today—and examines whether policy interventions coupling resources with social-capital support might prove more effective than traditional approaches. A thread throughout is Chetty's insistence that theory remains essential to empirical work, particularly for extrapolating findings to new contexts and handling general vs partial equilibrium dynamics that simple treatment-control comparisons cannot capture.