Media Briefings

INTERGENERATIONAL MOBILITY: Why what your parents earn matters more for your life if you’re British than if you’re Swedish

  • Published Date: October 2017

There are stronger associations between parents’ incomes and their children’s later life outcomes in the UK than in Sweden: new research by Anders Björklund, Markus Jäntti and Martin Nybom explains why.

According to their study, which is published in the October 2017 issue of the Economic Journal, the UK’s lower ‘intergenerational income mobility’ is mainly a consequence of the country’s greater social gradients in school performance and higher labour market returns to human capital. In other words, there are tighter links in the UK both between parents’ earnings and children’s educational achievements, and between qualifications and earnings.

The researchers explore at what stages of children’s lives country gaps appear, examining associations between parental income and individual childhood traits that are known to be linked with income advantages in adulthood – such as birthweight, height and school performance. It turns out that associations between parental income and such traits are indeed stronger in the UK than in Sweden.

The authors then investigate whether these differences can account for the country gap in intergenerational income mobility. While differences in the parental income associations in birthweight and height are too small to matter, school performance does account for a substantial part of the gap. But country differences in the earnings returns to measures of school performance are at least as important as the differences in the link between parental income and performance.

Since the early 1990s, economists have contributed to a growing body of research on intergenerational earnings and income mobility. This work speaks to important academic questions about parents’ investments in their children, and also to political debates about equality of opportunity and the performance of different economic systems.

The findings have received considerable media attention. The United States and the UK belong to the countries with strong persistence (that is, low mobility) of incomes from one generation to the next. The Nordic countries, on the other hand, have been found to have weaker intergenerational persistence.

What are the underlying mechanisms behind these country differences in the intergenerational persistence of economic advantage? While much research has examined the relative importance of different lifecycle factors within countries, these issues have rarely been examined in a cross-country setting.

The contribution of this research is to account for cross-country differences in intergenerational income correlations by examining the importance of parental income in different phases of their offspring’s early life. The authors analyse data from the British Cohort Study and Swedish administrative registers to study at what stages of childhood and adolescence the country gaps emerge. The main results are as follows:

• Intergenerational income mobility is significantly lower in the UK than in Sweden for both sons and daughters.

• There are significant country differences early in the lifecycle, and the associations between parental income and child traits are stronger in the UK than in Sweden.

• Country differences in parental-income gradients in birthweight and height are too small to matter, while those related to school grades and final educational attainment can account for a substantial part of the country gap in income mobility.

• Country differences in earnings returns to school performance are roughly as important as differences in the parental-income gradients in children’s grades and education.

• As returns to skills and income inequality are closely related, the findings therefore also help to explain the negative relationship between inequality and mobility that has been found in recent research.

ENDS


Notes for editors: ‘The Contribution of Early-Life versus Labour Market Factors to Intergenerational Income Persistence: A Comparison of the UK and Sweden’ by Anders Björklund, Markus Jäntti and Martin Nybom is published in the October 2017 issue of the Economic Journal.

Anders Björklund, Markus Jäntti and Martin Nybom are at the Swedish Institute for Social Research, Stockholm University.

For further information: contact Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com; Twitter: @econromesh); Anders Björklund via email: Anders.Bjorklund@sofi.su.se; Markus Jäntti via email markus.jantti@sofi.su.se; or Martin Nybom via email: martin.nybom@sofi.su.se