Whether the “American Dream” is alive and well is a hot topic incurrent politics. One way the…

Whether the “American Dream” is alive and well is a hot topic incurrent politics. One way the question is phrased is in terms ofintergenerational mobility. The argument is that our incomes shouldnot be too highly correlated with the incomes of our parents: itshould be possible to succeed economically even if you were born topoor parents. Many studies have used simple regression analysis tomeasure the relation between our own income (Y, usually measured inlogs) and our parents’ incomes (X, also in logs), and have foundthat a 10% difference in parents’ income (0.10 in logs) isassociated with about a 4% (0.04 in logs) difference in the incomesof their children as adults. Thus the intergenerational incomeelasticity is about 0.4. Suppose we design a program that giveslow-income parents a 10% increase in income during the years theyare raising kids. Do you think that their children would indeedearn 4% more as adults, as the regression predicts? Why or why not?Explain, making reference to the ideas of ceteris paribus andomitted variables bias. Please show all work thanks!