The neighbourhood is not what it used to be : has there been equalisation of opportunity across families and communities in Norway?

Abstract

Parents influence their children's adult outcomes through economic and genetic endowments, transmission of cultural values and social skills, and through choice of residential location. Using a variance decomposition framework which provides bounds on the effect of families and neighbourhoods, we find important effects of family characteristics as well as residential location on educational attainment and adult earnings in Norway. Families are more important than neighbourhoods as the correlations among siblings are significantly higher than among children growing up in the same local community. Sibling correlations are estimated to be a little lower than for the US, while correlations between neighbourhood children in Norway are found to be significantly weaker than in the US. Unlike previous studies, we also assess changes over time by studying children growing up around 1960 and 1970. While family effects are permanent over time, the impact of neighbourhoods is reduced by half in size from 1960 to 1970 and we link this result to several policy changes in the 1960s aimed at increasing equality of opportunity in Norway. Our results differ from previous US studies, suggesting that the role of families and neighbourhoods in explaining the degree of equality of opportunity and social mobility depends on labour market institutions and redistributive policies.