Understanding Intergenerational Mobility

Abstract
Brandén, G. 2018. Understanding Intergenerational Mobility. Inequality, Student Aid and Nature-Nurture Interactions. Economic studies 177. 125 pp.
Uppsala: Department of Economics, Uppsala University. ISBN 978-91-506-2733-6.

Essay I: A body of evidence has emerged in the literature on intergenerational mobility documenting that unequal countries experience less social mobility: a relationship known as the Great Gatsby Curve. In this paper I estimate the Great Gatsby Curve within Sweden across 125 commuting zones and 20 cohorts, exploiting both cross-sectional and longitudinal variation. I find that children who were exposed to higher levels of inequality during childhood experienced less social mobility as adults, thereby confirming the existence of a Great Gatsby Curve in Sweden. I also present new evidence on the underlying mechanisms of the Great Gatsby Curve. By decomposing intergenerational mobility into separate transmission channels, I find that the Great Gatsby Curve is exclusively driven by the mediating effect that children's educational attainment and development of cognitive and non-cognitive skills has on the persistence of income across generations. Hence, the results suggest that adverse effects of inequality on mobility can be alleviated by policies that target children's educational attainment and development of cognitive and non-cognitive skills.

Essay II: The causal effects of student aid on educational attainment and subsequent labor market outcomes is estimated by exploiting the repeal of the Recruitment Grant in 2006 in a difference-in-differences framework. The purpose of the Recruitment Grant was to increase enrollment in adult education among unemployed adults with incomplete upper secondary education, and thereby improve their prospects on the labor market. The grant replaced the loans in the national student aid system, and as such offers an opportunity to study the effects of student aid when credits constraints are absent. I find that the repeal of the Recruitment Grant reduced enrollment in adult education by 10 percent in the target population relative to the pretreatment enrollment rate, and that the number of passed credits decreased by 28 percent. In terms of labor market outcomes, the repeal increased the unemployment rate by 3.2 percentage points in the target population in 2008, and by 2.1 percentage points in 2009. Focusing on long term outcomes, I find that the repeal decreased average labor market income between 2012 and 2014 by about $280 while increasing the number of days in unemployment by 27.2 days in the same period. In sum, the repeal of the Recruitment Grant had sizable adverse effects for the target population.

Essay III (with Mikael Lindahl and Björn Öckert): This paper provides evidence on the importance of nature-nurture interactions for socio-economic outcomes, using administrative data on adopted children and their adoptive and biological parents. We study a large sample of adoptees born in Sweden 1932-1970, and use the education and income of the biological and adoptive parents as proxies for pre-birth and post-birth factors, respectively. The estimated interaction effects are typically non-positive and small: they account for around 5–10 percent of the overall intergenerational transmission. However, the interaction effects between pre-birth and post-birth factors are statistically significant and negative for educational attainment for sons and for the earlier cohorts. We find similar results if we instead treat children’s genetic and environmental background as unobserved latent variables. Thus, we do not find that a poor upbringing exacerbates any genetic disadvantages. Instead, a favorable family environment is likely to improve life chances for everyone, regardless of their genetic predisposition.

Keywords: Intergenerational mobility, inequality, student aid, adult education, difference-indifferences, propensity scores

Gunnar Brandén, Department of Economics, Box 513, Uppsala University,