We measure the effect of the discovery of oil in a US county on the subsequent evolution of income and education acquisition for individuals who were growing up in such a county, and compare it with the equivalent evolution of similar individuals who were growing up in a county where no oil was discovered.
We show that intergenerational elasticity of income became smaller in oil counties (an increase in income mobility), while the intergenerational coefficient of education became larger (a decrease in educational mobility).
The reason is that the discovery of oil changes the structure of labor demand in oil counties.
Increasing the availability of jobs that are not demanding of education, while providing relatively high wages.
The children of poor and the less educated agents in oil counties choose not to go to school and instead take those jobs, while the children of the richer and more educated do not differ in education attainment (or income) from the equivalent agents in non-oil counties.
Finally, we show that 70 years after the discovery oil counties were still richer, had less income inequality and more intergenerational mobility than non-oil counties.
Thus, we conclude that differences in economic structure are likely an important driver of the differences in intergenerational mobility across geography and time.