Population Size, Diversity, and Income Inequality

National Review: The Great Gatsby, Moby Dick, and Omitted Variable Bias  Jim Manzi

… But what about all the other potential reasons, beyond what their Gini Coefficient was in 1985, for varying levels of social mobility between countries as diverse as Japan, France, and New Zealand? 

The most obvious example is just the size of the countries. It’s at least plausible that much bigger countries contain more variety. In fact, if you do something as simple as recreate the Great Gatsby Curve, but use the population of each country as the X-axis, you get a very strong a statistical relationship (log-linear R² = .64). Big countries have higher IGE [Intergenerational Earnings Elasticity]. Call it the Moby Dick Curve.   

Alternatively, we might see that some countries tend to specialize more than others.  As a practical example, part of the reason that a country like Finland can have so much equality and social mobility versus America might be that many more of the relatively poorer farmers who trade food for Finnish mobile phones live and reproduce in other countries.  If so, then we might see that if we replace the X-axis with exports as a % of GDP, there could be another statistically significant relationship with IGE. Check (R² = .48).

Alternatively, different countries might be more or less populated by heterogeneous subgroups that are more likely to reproduce for non-economic reasons with others within their own group. Religious fractionalization versus IGE? Check (R² = .57).  …