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Parental investments

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Understanding socio-economic disparities in European countries

Generous maternity leave, affordable daycare, extensive social safety nets, excellent universal health care, and high-quality public schools are indeed prominent features of Nordic countries, including Denmark, Finland, Iceland, Norway, and Sweden. These nations are renowned for their strong public investments in children, fostering a belief that such policies promote social mobility and create a more equitable society. In fact, the intergenerational transmission of earnings is higher in these economies than in comparable economies in the Western world.

However, despite these policies, significant differences in learning outcomes persist between children from affluent and disadvantaged backgrounds in Nordic countries, of the same magnitude as those observed elsewhere in Europe. It is crucial to understand why this is the case if we aspire to design policies to increase equality of opportunity in learning.

In our recent IZA Discussion Paper, we use the Programme for International Student Assessment (PISA) datasets, designed to assess students' proficiency in mathematics, reading and science, to study how socio-economic status (SES) gaps in learning outcomes have evolved for over 20 years in Europe. PISA scores are explicitly designed to allow cross-country and temporal comparisons, enabling us to measure SES gaps in test scores, which are comparable across countries and over time.

In the past two decades across Europe, SES gaps in test scores have generally remained steady, although some increases have been noted in Nordic and Eastern European nations. Remarkably, Nordic countries exhibit comparable levels of SES gaps in test scores to most other European counterparts. The data does not show a significant correlation between SES gaps in learning outcomes and intra or intergenerational income inequality. Instead, a strong association emerged between SES gaps in learning and SES gaps in parental investment. This connection remains even when we take into account differences between age groups and countries.

These findings underscore the influential role of families in shaping children's learning outcomes, which overshadows the impact of even the most generous social policies (in Nordic countries) on social mobility. While public investments aim to level the playing field, unequal parental investments counteract these efforts. Higher levels of social mobility in these nations may predominantly stem from taxation and adult-focused social welfare programs, not from policies increasing opportunities for poor children.

© Pedro Carneiro, Hugo Reis, and Alessandro Toppeta 

Pedro Carneiro is Professor of Economics at University College London and IZA Research Fellow
Hugo Reis is Research Economist at the Economic Research Department (Structural Research Studies Unit) at the Banco de Portugal (Portuguese Central Bank) and IZA Research Affiliate
Alessandro Toppeta is Assistant Professor of Economics at SOFI, Stockholm University

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.

Related IZA World of Labor content:
Do school inputs crowd out parents’ investments in their children? by Birgitta Rabe
Intergenerational income persistence by Jo Blanden
Intergenerational return to human capital by Paul J. Devereux
School tracking and intergenerational social mobility by Tuomas Pekkarinen

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