Do rich kids have an advantage growing up? YES, they do!

Robert Kiyosaki is not an econ prof at Harvard University. However, his book?Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! became a best seller. It teaches readers how to overcome their financial disadvantage by learning from those with financial means.

Recently, a team of researchers led by Harvard University's celebrity economic professor, Dr. Raj Chetty, reached a similar conclusion. They found that the incomes of kids born to wealthy parents increased over time, but incomes declined for children born in low-income families. Their 128-page paper showed that while racial gaps shrank, they increased between classes. "Earnings increased for Black children at all parental income levels, reducing white-Black earnings gaps for children from low-income families by 30%."

"This paper has shown that economic outcomes deteriorated sharply for white children from low-income families in recent birth cohorts in the United States, while improving for white children from high-income families and Black children from across the parental income distribution. These divergent trends in economic mobility were almost entirely driven by differential changes in the social environments in which children grew up by race and class. In particular, outcomes improve across cohorts for children who grow up in communities with increasing parental employment rates, with larger effects for children who moved to such communities at younger ages. Children’s outcomes are more strongly related to the parental employment rates of peers they are more likely to interact with, suggesting that social interactions mediate changes in economic mobility.

"The most important takeaway from our analysis is that changing opportunity is feasible in short time frames. Community-level changes in one generation propagate to the next generation and can thereby generate rapid changes in economic mobility."