This document summarizes research on intergenerational mobility and the role of family policies and welfare states. It makes the following key points: 1) Family background has a stronger correlation with children's outcomes like income in countries like the US and UK compared to Nordic countries. Sibling correlations also suggest family plays a larger role outside Nordic countries. 2) Research shows income elasticities between parents and children have decreased over time in Nordic countries, suggesting greater mobility. Educational reforms in Sweden and Finland in the 1950s-60s increased mobility for children from lower-income families. 3) While welfare states aim to equalize opportunities, it is difficult to identify their causal impact on long-term mobility

1. Kela Lecture comment on
Gösta Esping Andersen
Asymmetric Opportunity Structures and Family
Policy
Ulla Hämäläinen
Senior researcher
Kela 6.6.2014

2. Intergenerational mobility, family background
and welfare state
• We already know some stylized facts
• Family affects the outcomes of their children
• The correlation between parents and their offspring is lower
in Nordic countries than it is e.g. in USA and UK
• Sibling correlations lower in Nordic countnries also
• We are learning more from the sibling correlations all the
time: about half of the sibling correlation on adult income is
explained by family background
− Sibling correlations also widen the perspective from merely
thinking that it is the parental income that counts
• But next questions of mechanisms: how they
operate is still at early states, but we are learning all
the time
2

3. Policy changes income mobility?
• Country comparisons: Nordic welfare states vs. UK,
USA, Italy, …
• Evidence also within countries (especially Nordic
countries with good quality data) of changes over
time: the income elasticities have changed by .10
units in some countries in no more than 10-15 years
• Björklund et.al. (2007): Sweden brother correlations: 1930s
the correlation .34; from 1950s .23
• Pekkala & Lucas (2007) for Finland: 1930s parental
correlations: for sons 1930s .30 = > 1950s .20; daughters
.25 to .15
• Bratsberg et.al. (2007): decline also in Norway 1950s to
1960s
(For a review see Björklund & Jäntti (2009) The Oxford Handbook of Economic Inequality)
3

4. …policy changes…
• Direct evidence from large educational policy
reforms to identify direct causal evidence:
comprehensive school reforms & other
• Causal inference due to gradual implementation
• Sweden 1950s: Meghir & Palme (2005) reform had a
positive income on earnings for children from low income
families, but the not on average = > income mobility
increase. Holmlund (2007) directly on mobility: increased
• Finland: Pekkarinen et.al. (2007) income elasicity .30 => .23
• Mayer & Lopoo (2008) exploit variation in US government
expenditure: states with higher expenditure => lower
4

5. • Very difficult to identify causal mechanisms of
welfare state policies to children’s (long-term)
outcomes when the policies have been there for a
long time and policies are universal
• Large reforms are rare
• Difficult to show the effectiveness of small reforms
• A huge amount of work going on on how different (generally
small) social reforms affect families and children
5

6. • Polarized parenting i.e. ratio of care time
• More educated parents invest more time on their
children
• Eva Österbacka (2010 IZA dp) on time use data
• Hämäläinen and Takala (2007) on fathers’ parental leave
usage: why fathers with high education / high income are
(low compensation rate) are the ones taking parental leave
6

7. Quality child care as an early investment
• Why (even) economists are interested investments
in children?
• Governments who care about equity can
compensate the diffs either in final outcomes or try
to equalize initial endowments
• Research suggests that equalizing the early
endowments with early interventions is more cost-
effective than trying to affect final outcomes
• James Heckman. Rate of return to early investments on
disadvantaged children around 10%
7

8. • Fixing the problems in adolescence (or later) has
proven difficult, non-effective and costly
• E.g. interventions for unemployed or NEET youth and adults
• For a review on the effectiveness of active labour market policies
see e.g. Card, et.al. in Economic Journal (2010, 120:548)
• Mounting evidence that quality child care help
disadvantaged children
8

9. Case: Finland
• According to Haataja – Juutilainen (2014) Finnish
moms having their first kid around millenium have
been on average 3,5 years home with their children
• The longest care periods are among those with low
education and low attachment to the labour market
• Subjective right for publicly provided child care with
income related cost of care + home care allowance
• The Finnish exceptionality in Nordic context is that
children aged 3-6 are not participating in formal
child care
9

10. Formal childcare participation, under 3 years
10
Source: Nososco

11. Childcare and primary education participation,
0-5-years
11
0
10
20
30
40
50
60
70
80
90
Finland Norway Sweden Denmark
%

12. • Question: if the evidence is pointing to the direction
that ”learning begets learning” or ”skills begets
skills” AND especially the disadvantaged children
would gain most from the early interventions via
quality care
 does this mean that we Finns have chosen the
wrong policy instruments in our care policy?
 Even more bold question would be…
 The answer: we need good quality research
• Only good quality will do, since…
12

13. Most disadvantaged children?
• Stylized fact: First generation immigrant children are
doing worse than natives everywhere in educational
measures (e.g. Pisa)
13

14. Immigrant deficit in educational outcomes
14
Raw difference
Natives
at 23
One
parent
Finn
OECD
Russia,
Estonia,
Former
SU
Other
immigr.
Secondary educ
degree by 23
.85 -.07 -.18 -.11 -.37
Enrolled in university
or polytech by 23
.45 .00 -.05 -.09 -.26
Source: Ansala, Hämäläinen, Sarvimäki (2014)

15. Difference to natives after controls
15
After controls
One
parent
Finn
OECD
Russia,
Estonia,
Former
SU
Other
immigr.
Secondary education
degree by 23
-0,03**
(0,01)
-0,07
(0,05)
0,03*
(0,01)
-0,18**
(0,03)
Enrolled in university or
polytech by 23
0,03**
(0,01)
0,09**
(0,03)
0,08**
(0,02)
-0,05**
(0,01)
OLS regression, area clustered standard errors in parenthesis; Sign. <0.01 **, <0.05 *
Controls for birth year, area, # of siblings; socio econ background at age 15

16. Children’s income deciles according to the
language spoken
16

17. • One can argue that early interventions would be of
great importance for immigrant children living in
deprived backgrounds
• Multiple disadvantages: income, language, familiarity with
the educational systems and labour markets
• Question: Is the quality child care and early
intervention system working for these children?
17