Earnings, education, and inequality

Educational policy can influence inequality by changing the skill composition of the labor force. By educational policies it may also be possible to break the intergenerational persistence of inequality. Our research will shed new light on how the design of the education system affects labor market outcomes. We also wish to improve the understanding about the sources of intergenerational correlations in earnings. Finally, we will examine how globalization affects employment and earnings in Sweden.

The transmission of inequality across generations

Inequality is persistent across generations but the mechanisms behind the intergenerational correlations are not well understood. Our data allow us to answer questions that cannot be answered for most other countries. For example, how much of the association between outcome variables for the child and a parent is due to a causal effect from parental characteristics and how much is transmitted through unobservable family factors and genetics? Unique Swedish register data allow matching of biological and adoptive parents, children and siblings and allow us to shed light on the mechanisms behind the intergenerational correlations. The data allow us to look at trends for several decades and to explore how the growth of the welfare state has affected intergenerational correlations in income and education.

The labor market effects of globalization

The evolution of inequality is often characterized as the result of a race between education and technology. Technological growth is viewed as largely skill-biased, thus increasing the demand for skilled labor and causing an increase in inequality. However, to the extent that this demand shift is matched by increasing supply of skilled labor via higher education, the impact on inequality may be negligible. In the recent decade or so, the role of globalization in shaping inequality has come to the fore in policy debates and research. Increasing trade with developing countries is one channel whereby the demand for low-skilled labor may be adversely affected. Another channel is international outsourcing of economic activities to countries with lower wages. Our research attempts to shed light on various labor market effects of globalization. We will also study temporary labor migration from EU countries, noting that anecdotal evidence indicates that labor migration has become increasingly important in some sectors. However, there is no evidence on how this development has affected wages and employment.