Life-Cycle Economic Returns to Educational Mobility in Denmark

Abstract

Although most studies of the transition from school to work take a snapshot perspective in examining economic returns to education, such returns evolve over an individual’s lifetime. We empirically test a theoretical formulation derived from the cumulative advantage mechanism about enduring life-cycle effects of educational mobility on income. We analyse income trajectories for all Danes born in 1960–1961, and we consider how the welfare state may counteract certain mechanisms of intergenerational transmission that give children with college-educated parents better opportunities in the labour market. We find only small direct effects of parental college attainment on earnings trajectories after we control for offspring college attainment. Thus, schooling acts as a powerful and enduring economic leveller of family background effects in Denmark. Our analyses also show direct effects on trajectories in property income derived from wealth, suggesting that the welfare state has a harder time equalising income from wealth than from earnings.