Great Gatsby curve

The Great Gatsby curve is a chart plotting the (positive) relationship between inequality and intergenerational social immobility in several countries around the world.

The curve was introduced in a 2012 speech by chairman of the Council of Economic Advisers Alan Krueger, and the President’s Economic Report to Congress, using data from labor economist Miles Corak. The name was coined by former Council of Economic Advisers (CEA) staff economist Judd Cramer, for which he was given a bottle of wine as a reward. The curve plots "intergenerational income elasticity"—i.e. the likelihood that someone will inherit their parents' relative position of income level—and inequality in the United States and twelve other developed countries, though some versions of the curve include developing countries. Countries with low levels of inequality such as Denmark, Norway and Finland (all located in European Scandinavia) had some of the greatest mobility, while the two countries with the high level of inequality—Chile and Brazil—had some of the lowest mobility.

The name of the curve refers, somewhat ironically, to Jay Gatsby (born Gatz), the character in F. Scott Fitzgerald's novel The Great Gatsby. Jay shows a high degree of mobility, rising from being a bootlegger, to leading the Long Island north shore social set .

Journalist Robert Lenzner and lawyer Nripendra Chakravarthy call it "a very frightening curve that requires policy attention." Krueger predicted that "the persistence in the advantages and disadvantages of income passed from parents to the children" will "rise by about a quarter for the next generation as a result of the rise in inequality that the U.S. has seen in the last 25 years."

Journalist Timothy Noah argued the effect results from growing inequality:

you can't really experience ever-growing income inequality without experiencing a decline in Horatio Alger-style upward mobility because (to use a frequently-employed metaphor) it's harder to climb a ladder when the rungs are farther apart.

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