American policymakers often point to the generous social welfare policies of Denmark—free college tuition; universal, high-quality pre-K; universal access to health care; plentiful childcare and maternity leave—as a blueprint for a more equal society. Yet recent research by MIP network member Rasmus Landersø and HCEO Co-Director James Heckman shows that despite these benefits, substantial inequality of child outcomes remains across social and economic classes in Denmark.

In their working paper, “Lessons from Denmark about Inequality and Social Mobility,” the authors find that family influence on child outcomes in Denmark is comparable to that in the U.S. Their research shows that in both countries children of college-educated women do substantially better than children of parents who did not finish high school across many dimensions.

“Our analysis encourages a critical examination of conventional wisdom from earlier studies of inequality and social mobility,” Heckman says. “The persistence of inequality in human capital formation and education in Denmark suggests that it will be fruitful to pursue a much deeper understanding of how parents affect child development.”

Using longitudinal data from both countries, the paper synthesize findings from their projects in three main areas: intergenerational educational mobility, intergenerational transmission of wellbeing, and parental investments including choice of neighborhood, peers, and schools. 

Many of Denmark’s social welfare policies were introduced in the 1960s and 1970s, when public spending as a percentage of gross domestic product (GDP) increased from around 20 percent in 1950 to almost 50 percent by 1980. By comparison, in the U.S., public spending and transfer payments as a fraction of GDP were around 15 percent in 1950 but less than 30 percent in 1980. Yet, despite this divergence in public spending and the role out of free college tuition and universal pre-K in Denmark, educational mobility rapidly declined for Danish cohorts born during the 1970s and 80s. For those born in the mid-1980s, educational mobility in Denmark was on par with the U.S.

“Comparing the 1960 and 1985 cohorts, college completion was around 10% and 20%, respectively,” of children whose fathers did not finish high school, the authors write. For children whose fathers finished high school, college completion rates are around 15 percent and 30 percent. And for those whose fathers obtained a college degree, the numbers are 30 percent to 60 percent, respectively. These numbers clearly show that family influence remains crucial to Danish educational attainment. As the authors note, “Equality in access to services is not the same as equality of opportunity.”

Next the authors analyzed the traditional approach to measuring intergenerational transmission of economic status. Most literature compares snapshots of the lifetime income of parents and their children. “This approach gives only a limited picture of the transmission of lifetime well-being across generations,” the paper notes. Because of the richness of Danish register data, the authors are able to analyze lifetime measures of intergenerational elasticities of income, which takes into account different life-cycle dynamics such as increased schooling and timing of marriage and childbearing. The data show that, using this approach, intergenerational elasticities of income of lifetime well-being are much higher than those estimated using incomes measured over a small window of ages. “Well-being is much more tightly linked across generations in Denmark than conventional snapshot measures of lifetime income indicate,” the authors find.

Lastly, the authors consider neighborhood sorting by economic status, which has been increasing over time in both countries. This sorting is most pronounced during the preschool years of the first born child. Geographic mobility declines rapidly once children enter school. “In the years leading up to the first child’s birth, sorting into affluent areas becomes increasingly prevalent for highly educated mothers,” the authors find. This segregation in turn impacts school quality, peer quality, and more, as better-resourced parents are better able to influence the quality of their children’s schools. 

“Denmark is a laboratory for understanding the origins of inequality and social immobility because its generous provision of social services does not eliminate inequality in many important life outcomes across generations,” the authors write. “Thus, the origins of inequality and social mobility lie elsewhere. Families shape child outcomes and affect the utilization of programs even when these are universally available.”

This paper shows the need for more research on how parents influence child development, through direct parental investments and through neighborhood choice. Related to the neighborhood effects literature, the authors argue that their findings beg for “further analyses of the factors determining how, when, and under which conditions families decide where to live, and how these decisions shape children’s lives.”

The paper also notes that policymakers must take into consideration the dynamic role of both “the family and markets in shaping child outcomes and in complementing or undermining public policy.” Effective public policy, the authors write, must recognize the “Matthew Effect,” that more-advantaged families are better positioned to access and influence resources.

As Heckman notes, “If there is one overarching conclusion from the study, it is that formal equality in access does not guarantee equality of opportunity.”