The Decline of Intergenerational Mobility in Denmark: Returns to Education, Demographic Change, and Labor Market Experience

Rising income inequality within industrialized nations over the last several decades has raised concerns about the potential for changing intergenerational mobility as well. This paper examines changes in intergenerational mobility in Denmark, which has one of the lowest levels of inequality in the world and also one of the highest levels of intergenerational mobility. We show that intergenerational mobility in Denmark has been declining for both men and women since the 1960’s across the most recent cohorts who are now old enough to plausibly measure permanent adult income, and that these changes were concentrated among children born into the middle three-fifths of the income distribution. We attempt to understand the sources of this decline by drawing on Danish register data to test various hypotheses related to parental and family characteristics, including parent marital status, parent wealth, local area characteristics, primary school quality, educational attainment, internal migration to urban areas, marriage, assortative mating, childbearing, and work experience. Our results highlight the importance of both parent and child work experience and family structure in the family of origin among both men and women as well as, to a lesser degree, marital status, assortative mating, and childbearing among women. Although education was an important driver of parent-child income rank associations in each cohort, it played little role in accounting for increases in those associations across cohorts.