Finding the Land of Opportunity Intergenerational Mobility in Denmark Jesper Eriksen Department of Business and Management Aalborg University 178,866 characters with spaces - 74.5 pages May 31, 2018 Abstract Denne afhandling omhandler lige muligheder inden for intergenerationel mobilitet i en dansk kontekst. Afhandlingen forholder sig til spørgsmålet, “Er lighed i muligheder påvirket af lokalområder i Danmark?”. Jeg besvarer forskningsspørgsmålet ved at undersøge tre under- spørgsmål: (1) “Hvad karakteriserer den geografiske fordeling af muligheder i Danmark?”, (2) “Hvorfor kunne bestemte grupper, defineret ved geografi, forventes at opleve højere eller lavere mobilitet? Hvilken rolle spiller lokalområde karakteristika som forklarende variabel i forhold til lige muligheder?”, og (3) “Hvad er effekten af at flytte fra ét lokal område til et andet for lige muligheder for flyttende familier?“. Først opstiller jeg et teoretisk grundlag for at kunne diskutere lighed i muligheder, som filosofisk begreb, i relation til gængse mål for lighed i muligheder: intergenerationel mobilitet. Jeg påviser, at det ikke er muligt at vurdere, hvorvidt lighed i muligheder påvirkes ud fra nogen af de tre teorier ved alene at undersøge mobilitetsmål. For at besvare forskningsspørgsmålet kræves der information om, hvordan lokalområder kausalt påvirker intergenerationel mobilitet. For at besvare første underspørgsmål beskriver jeg grundlæggende træk i litteraturen om in- tergenerational mobilitet, samt den metodiske literatur om intergenerationel mobilitetsmål. Datagrundlaget for besvarelsen er dansk registerdata for perioden 1980-2012, som tillader kobling af børn og forældre, samt måling af samlet indkomst før skat. Ved at allokere børn født mellem 1973-1975 til de kommuner, som primært vokser op i, fra de er 7-15 viser jeg, at der er substantiel variation i intergenerationel mobilitet på tværs af danske kommuner. Med udgangspunkt i diskussionen af teorierne om lighed i muligheder, er det ikke muligt at vurdere om lighed i mulighed faktisk varierer fra kommune til kommune. Resultatet kan alene indikerer, at det kan være er tilfældet. Herefter introducerer jeg “Neighborhood Effects” litteraturen, der omfatter en række teoretiske bud på, hvorfor variation i karakteristika for lokalområder skulle påvirke lighed i muligheder. Med udgangspunkt i teorierne opstiller jeg 9 forskellige variable som indikatorer for lokalområde literaturen; andelen af arbejdsløse til befolkningen i alderen 15-64, andelen af individer, som tilhører den national tiende indkomst May 31, 2018 decil, andelen af individer, som tilhører den nationale nederste indkomst decil, andelen af teenagemødre til befolkningen over 15, andelen af teenagefødsler, andelen af første og anden- generations ikke-vestlige immigranter, andelen af højtuddannede, gini koefficienten som mål for økonomisk ulighed, og antallet af rapporterede kriminelle handlinger relativt til befolkn- ingsstørrelsen. Jeg finder, at målene ikke ko-varierer med mål for relativ mobilitet, men at de ko-varierermed absolut mobilitet, den forventede indkomstrang for et barn født af foræl- dre ved den 25. indkomst percentil i forældrenes indkomst fordeling. Fundet indikerer altså, at mobilitet er relateret til karakteristika for kommuner og deres indbyggere. Dog kan re- sultatet ikke afgøre, hvorvidt der faktisk er substantielle forskelle i lige muligheder mellem kommuner. Den observerede ko-variation kan være drevet af selv-selektering. Tredje under- spørgsmål besvares med henblik på at vurdere, om der er kausale effekter på intergenerational mobilitet af lokalområder, approksimeret af kommuner. Her opstiller jeg et kausal estimations framework, som undersøger tilpasningen i forventet indkomstrang for to sæt af børn, som fly- tter mellem kommuner. Den første stikprøve består af børn, som flytter én gang i alderen 8-15, den anden af børn, der flytter én gang i alderen 8-20. På baggrund af parametriske og semi-parametriske tests afviser jeg, at lokalområder har en kausal effekt på intergenerational mobilitet på kommunalt niveau. Konklusionen på afhandlingen er, at der ikke er tegn på at lighed i muligheder er påvirket af lokalområder i Danmark, når lokalområder er opgjort som kommuner. Contents Preface iv 1 Introduction 1 1.1 A Roadmap . .6 2 Notions of Equality of Opportunity 8 2.1 Formal Equality of Opportunity . 10 2.2 Fair Equality of Opportunity . 11 2.3 Algorithmic Equality of Opportunity . 14 2.4 Discussion . 17 3 Intergenerational Mobility and Its Spatial Variation 21 3.1 Standard theory of intergenerational mobility . 21 3.2 Measuring Intergenerational Mobility . 30 3.3 Other Studies in Intergenerational Mobility in Denmark . 41 3.4 Data and Measures . 44 3.5 Findings - The National Level . 51 i May 31, 2018 3.6 Mobility by Municipality . 55 4 Neighborhood Effects 62 4.1 Theoretical Frameworks . 62 4.2 Studies in Neighborhood Effects and Intergenerational Mobility . 68 4.3 Data and Neighborhood versus Municipalities . 76 4.4 Correlations - Or, The Descriptive Findings . 80 4.5 Estimating Neighborhood Effects . 82 4.6 The Effects of Neighborhoods . 86 5 Discussions 93 6 Conclusion 100 Bibliography 102 Appendices 117 A Existing Research 118 A.1 The Great Gatsby Curve . 119 A.2 Non-linearities in IGEs . 120 A.3 Derivation for Solon (2004) . 120 B Income 122 B.1 Income Densities . 122 ii May 31, 2018 B.2 Income Scatter plots . 123 B.3 Income Percentiles for the Total Sample . 124 C Danish Municipalities 126 D Municipality Results 128 D.1 Densities of IGE and Rank-Rank Coefficients . 128 D.2 County Mobility from Chetty et al. (2014) . 129 E Neighborhood Effects 130 E.1 Gini-coefficient . 130 E.2 Relations between the expected child rank and difference in outcome munici- pality . 132 iii May 31, 2018 Preface Several acknowledgements are due. It is the culmination of many years of studies, and I remain grateful to the fellow students that I have had the joy to interact with at both Aalborg University and my semester spent abroad. Some, of course deserves particular thanks in excess of what a grateful student might give. In Spring of 2016, I contacted members of the IKE research group at Aalborg University, looking for opportunities to work as a research assistant. To my luck, Ina Drejer found it in her heart to not only hire me, but ask me if I would consider becoming the first 4+4 PhD student at the department of Business and Management. I could hardly say no, and started what has been two years of seemingly endless learning in the warm company of colleagues in the IKE group. The position also came with the opportunity to work on subjects that I have come to find near my heart: economics of education and social mobility. These interests are at the very foundation of the present thesis. It appears to me that few questions are as important as why we fare the way we do in life - why do some become homeless and left for living in city streets, while others good to elite colleges and start careers with prospects of security and satisfaction for years to come? Are there substantial differences in society or within us that drives these differences, or is it simply a game of chance which cannot be predicted. At is core, these questions touches on the notion of Equality of Opportunity, a hallmark idea of modern as well as ancient philosophical thoughts on how to create the best society for its citizens. Delving into the work of this thesis, I have had the opportunity to not only learn from the best, but develop my thinking substantially on these questions and ideas. Throughout the process of twisting and turning data, reading and writing endless pages, several people have shown their good will and listened provided comments as I rambled about intergenerational elasticities and correlations, and Rawls notion of fair equality of opportunity. Among them are Søren Etzerodt, a friend, colleague, and co-author, who has been a part of inspiring and sparking my interest in doing research since our very first shared semester at Aalborg University. Having started our research journeys together, he has also, mercifully, read and commented on substantial parts of the thesis. Maria Junker Nielsen has spent hours combing through my findings with seemingly endless enthusiasm, as well as been a solid friend iv May 31, 2018 through years of studies in Aalborg. Similarly, I have shared many a pleasant conversation with Jonas Thorborg Stage as we together deciphered the deeper questions of the thesis. Frederik Treney deserves thanks, not only for helping me with the editing of sections, but also for the constantly good mood that he has helped bring about even when writing was tough. Most dearly to me, is Kat Stolerman. She has been a constant source of joy and and a steadying force throughout the last months of writing. She is the primary source of all good writing skills that I have developed (and hopefully employed) for this thesis. She has saved many a drafted section from atrocities towards the gods of grammar, and deserves credit for all readability of the thesis. Naturally, a special thanks also goes to my two PhD supervisors, Jacob Rubæk Holm, and and Martin David Munk. For the last two years, Jacob has been a role model of how to deal with the world of academia, and a steadfast supporter of all of the (sensible) ideas that I have put before him throughout the last two years. As one walks through endless days of work, the knowledge that your supervisor has your back is one of the strongest motivators to keep pushing when outcomes are unknown. Martin has not only been a PhD supervisor, but also the supervisor for this thesis. From many conversations, I have developed my understanding of the field of intergenerational mobility, and without his guidance, needless to say, this thesis would not have come to its present standing were it not for Martin’s comments. It remains only to be said that all errors are my own and that I hope you, dear reader, will find the content of this thesis as interesting as I have while writing it.