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Question 7 Part A: [5 marks] Consider that household incomes are measured twice. In 2010, each household income is categorized as falling into 1 of 5 income quintiles. The same process is then performed in 2020 with the table below representing a transition matrix. Each row captures the degree (or lack thereof) of transition from a given income quintile in 2010 to an income quintile in 2020. Comment on the degree of 'lifetime' economic mobility in this economy. 2020 1st 2nd 3rd 4th 5th 1st 0.45 0.20 0.15 0.14 0.06 2nd 0.25 0.41 0.19 0.11 0.04 3rd 0.14 0.21 0.32 0.21 0.11 2010 4th 0.06 0.13 0.27 0.32 0.21 5th 0.04 0.08 0.12 0.23 0.54 Part B: [5 marks] The below regression captures the degree of association between parent income (y ) & child income (y) - both measured during their respective working years. The two variables are specified in log terms such that the key parameter estimate - the slope coefficient - can be interpreted in percent terms. The size of this parameter estimate presumably ranges from 0 to 1. Given this information, comment on the degree of 'inter-generational' mobility in this economy. In(y ) = 10.06 + 0.33In(y )