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Social mobility and economic development

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Guido Neidhöfer examines how social mobility ties into economic development across Latin America. By mapping intergenerational mobility in education across 52 regions and tracking its progress over time, the research sheds light on the evolving landscape of social mobility.

Image courtesy of interviewee. October 30, 2024

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This video discusses social intergenerational mobility and its significance as an indicator of how likely individuals are to change their socioeconomic status relative to their parents. It emphasizes that higher social mobility indicates a society with better equality of opportunity, allowing individuals to attain economic success regardless of their family background. The focus of the study is on intergenerational educational mobility in Latin America over the past 80 years, examining how this mobility influences economic development.

The researchers collected a large dataset from 52 regions across 10 Latin American countries, involving over one million individuals, to analyze the relationship between social mobility and economic development. Previous studies have pointed out the historical context of social mobility research in sociology and economics, with notable contributions from various scholars.

The study finds that regions with higher social mobility tend to exhibit greater economic development, challenging the notion of a trade-off between equity and efficiency. Instead, it concludes that improving social mobility is beneficial for economic growth, as it leads to better allocation of talent and improved employment opportunities for individuals from disadvantaged backgrounds.

In summary, the study advocates for policies that promote social mobility as they are not only equitable but also economically advantageous, suggesting that investing in such policies can yield significant long-term benefits for society. Future research avenues include deeper exploration of mechanisms linking social mobility to economic development and assessing the effectiveness of various policies aimed at improving mobility.

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Here are five key points from the video regarding social intergenerational mobility and its significance:

1. **Definition and Importance of Social Mobility**: Social intergenerational mobility measures how likely individuals are to change their socioeconomic status compared to their parents, often analyzed through factors like income, education, and occupation. Higher social mobility indicates greater equality of opportunity within society, allowing individuals to achieve economic success regardless of their family background.

2. **Focus of the Study**: The study specifically investigates intergenerational educational mobility in Latin America over the past 80 years, analyzing the correlation between parental education levels and children's education as a measure of social mobility. The researchers aim to understand how this mobility influences economic development across different regions.

3. **Unique Dataset and Methodology**: The research employs a comprehensive dataset of over 1 million individuals from 10 Latin American countries, combining various sources to create a harmonized measure of intergenerational mobility and economic development. By using this data, the study examines regional variations in mobility and its impact on economic outcomes.

4. **Findings on Regional Variations**: The study reveals significant spatial patterns of social mobility, with higher mobility levels in countries like Chile and Argentina compared to lower levels in parts of Central America. Additionally, within countries like Brazil and Chile, there are substantial regional disparities in social mobility.

5. **Economic Implications of Social Mobility**: The findings suggest that improving social mobility not only promotes fairness but is also economically beneficial. Higher social mobility leads to better allocation of talent and skills in the job market, contributing to overall economic development. The study argues for policies that enhance social mobility as both socially and economically desirable investments.

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Here are some key quotes extracted from the video, which highlight its main ideas regarding social intergenerational mobility and its relationship with economic development:

1. **Definition of Intergenerational Mobility:**
- "Social intergenerational mobility is generally a measure of how likely it is for people to change their socioeconomic status compared to their parents."

2. **Importance of Social Mobility:**
- "Higher social mobility suggests that individuals have a greater chance of achieving economic success regardless of the family background."

3. **Focus of the Study:**
- "Specifically, we look at how social mobility has impacted economic development in Latin America over the last 80 years, focusing on intergenerational educational mobility."

4. **Methodology:**
- "We do this using an empirical analysis of Latin American countries, with a huge dataset including more than 1 million individuals."

5. **Literature Connection:**
- "The literature on intergenerational mobility has a long history in sociology, economics, also other disciplines."

6. **Theoretical Foundations:**
- "The mechanism behind the relationship is that with lower social mobility and lower equality of opportunity, there is a situation which can be called misallocation of talent."

7. **Impact of Increasing Mobility:**
- "Improving social mobility is consistently associated with higher levels of economic development."

8. **Societal Benefits of Mobility:**
- "With improving social mobility, we have a better allocation of talent...and the whole society benefits."

9. **No Trade-Off Between Equity and Efficiency:**
- "There is no trade off between equity and efficiency regarding social mobility; improving social mobility is a smart investment from an economic point of view."

10. **Conclusion:**
- "Improving social mobility is not just fair; it’s also a smart investment from an economic point of view."

11. **Importance of Policies:**
- "Policies promoting social mobility are not just socially desirable, but they're also economically beneficial."

12. **Future Research Direction:**
- "More and more evidence is needed to understand the relationship and the mechanism behind social mobility's impact on economic performance."

These quotes encapsulate the essence of the video and its arguments concerning the relationship between social mobility and economic development, particularly in the convideo of Latin America.

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Social intergenerational

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and mobility is generally a measure of how likely it is

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for people to change their socioeconomic

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status compared to their parents.

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So this can generally be measured by income, education,

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occupation, or other measures,

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but what is important about it is that is usually

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of understood as a key indicator of equality

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of opportunity within the society.

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So higher social mobility suggests

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that individuals have a greater chance of achieving,

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economic success regardless of the family background.

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And this indicates a society

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where opportunities are more equally distributed.

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What we do in our studies is to analyze social mobility

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as a driver of economic development.

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Um, so specifically what we do is we look at

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how social mobility has impacted economic development in

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Latin America over the last 80 years,

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and our focus is on intergenerational educational mobility.

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So basically we could say how likely is it for someone

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to move up in terms of education, no matter

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what background the parents have.

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Okay. Um, we do this doing an empirical analysis,

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collecting harmonizing data on 52 regions in 10

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Latin American countries.

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We add up with a huge data set,

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including more than 1 million individuals,

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and these individuals represent basically the,

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the whole, region.

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And we use this data to see if areas

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where people had better chances of improving their education

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ended up being, more economically developed,

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when those individuals

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that experienced this higher mobility were then,

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in the workforce and contributed to the economy.

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The literature on intergenerational mobility has a long

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history in sociology, economics, also other disciplines and,

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and, and hi historically also philosophies,

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talked about this in past, in economics,

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we could mention, for example, the early studies

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by Becker Homes, for example, or more recently, Raach Che

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and his co-authors with their Opportunity insights project.

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And we could also mention,

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because they are very connected to, to the, the,

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to this, the study, that,

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that we are doing some theoretical models, by,

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or that galler and co-authors

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that create already a link in the theoretic models

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between accumulation and allocation of human capital

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and economic development.

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So what some studies have done, and,

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and we also did the, a previous study

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where we also did something similar is to,

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investigate this relationship somehow empirically

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by testing the relationship between equality of opportunity,

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social mobility, and economic performance

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or economic development.

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So some studies did it descriptively, for example,

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of cross countries like our previous

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study and, and some others.

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Some others in more specific context, like for example,

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the US labor market or others,

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Even by evaluating, for example,

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empowerment programs in village,

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in developing countries.

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So what, what, what we did now

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and what the contribution of our study is, is

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that we provide the first large scale analysis we could say,

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investigating several cohorts across different countries

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over a long time span,

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taking a a across regional analysis within countries,

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and also diff using different measures

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of economic development.

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And this way we are able to contribute to this literature

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by having this, this new results on the relationship.

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I think one of the contributions was also

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that we use a unique dataset

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that we put together from different sources.

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So the dataset, with which we measure,

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intergenerational mobility,

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in Latin America includes more than 40 national

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representative household service from 10

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different countries.

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We harmonize these data

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to ensure comparability across countries,

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surveys, and over time.

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And, as I said

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before, overall it's, over 1 million

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of individuals in these data sets, which are representative

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of the sample of almost the entire entire region.

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Um, with these data sets, we measure,

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intergeneration mobility in education for individuals born

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between 1940

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and 1989, using

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measures which are standard in the literature.

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Like, for example, the correlation between parents

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and children's years of schooling as a measure of

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of social mobility.

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And, and this is a also approximate

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or give us an idea of equality of opportunity in a society.

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And we do this for 52 subnational regions within

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these 10 countries.

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Then we integrate this data set with several other indices

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for economic development.

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Um, of these 52 regions that we either estimate ourselves,

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for example, average income, labor force participation,

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poverty rates, and so on,

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or that we retrieve from different surveys.

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So for, sources, sorry, for example,

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nighttime luminosity measured from satellite images

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as a measure of development.

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And so integrating this data set, we are,

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this data sets, we are able to measure the relationship

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between social mobility, intergeneration, mobility

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and, economic development with this data.

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Finally, we are able to offer a, I would say,

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quite exhaustive geographical overview of how,

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children's educational attainment relates

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to the parental educational background in Latin America.

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Um, and the, the, the variations

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that the analysis reveals are quite interesting,

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I think both within and across countries.

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So there are some clear spatial patterns, for example,

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there are consistently higher levels

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of social mobility in some pan countries, for example,

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in the southern part of South America, Chile and Argentina,

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and, lower levels in, in,

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northern regions like Central America, for example.

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Um, but it's what is also very interesting is the within

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country heterogeneity.

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So also within countries there's a great degree of,

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variation, across regions.

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For example, again, the example of Chile, it exhibits lower,

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lower up mob upward mobility in the north compared

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to the south, for example, sorry,

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lower in the south compared to the north, or in Brazil.

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It's the other way, way around.

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So a lower mobility in the north compared to the south.

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So these are main geographical patterns that arise

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and which we found very interesting.

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The mechanism which are behind theoretically,

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let's say we should start by, I think we should start

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with the key theoretical mechanism, which are behind,

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which should be behind the relationship, namely that

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with lower social mobility and no equality

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or lower equality of opportunity,

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there is a situation which can be, called,

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misallocation of talent.

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So if only, let's say the, the kids of, advantage

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families have the opportunity to study and succeed in life

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and have better occupations

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and so on, then we lose a lot of talent,

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of individuals that maybe are very talented,

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but they grew up in poor families

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and disadvantaged households

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and cannot achieve this, to, to,

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to improve their skills, as their,

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talent would would require to become,

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doctors, engineers and so on.

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So, the mechanism, then is

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with improving social mobility,

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we have a better allocation of talent.

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We have a better match between skills, actual skills

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of individuals and their education

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and their, job opportunities and so on.

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And the whole society benefits of it, of course,

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because we then have the best doctors,

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the best engineers and so on.

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So this is the mechanism behind and, if this is,

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but, but it could also,

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there could also be a trade off potentially.

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So we might have to give up some, efficiency of systems

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to get more, equality.

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So it, it could also be the, the fairness aspect,

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which is more important.

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And then we would like to improve social mobility

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because of fairness considerations,

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but we would know about the trade off that exists.

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Now, our, the key message of our findings,

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I would say is the following.

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There is no trade off between equity

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and efficiency regarding social mobility,

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but the other way

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around improving social mobility is consistently associated

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with economic development and growth in Latin America.

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So what we find is the regions

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that had higher social mobility in the past

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have then higher levels

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of economic development later on when the children

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that experienced this higher mobility

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and more equality of opportunity,

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are active on the labor market

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and contributing to the economy.

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And the main channel seems actually to be,

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rather than the accumulation

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Of human capital.

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So generally rising educational opportunities for all,

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let's say it's really the allocation channel.

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So the opportunities for improvement that rise

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for children from disadvantaged families,

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and this is what contributes to,

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to economic development probably

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because more talents are, are,

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or more pot more talented people,

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children have the possibility to develop these talents.

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The main conclusion, let's say, that we could say

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of our study is that improving social mobility is not just

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fair and we want it because it's fair

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and we want to live in a just society,

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but also it's a smart investment from

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an economic point of view.

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So we actually improve the life, the life of others,

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and there are positive externalities when

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we improve social mobility.

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So, this means that

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policies promoting social mobility are not just socially

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desirable, but they're also economically beneficial, right?

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And, hence we have to take this into account.

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So even if these policies may create some considerable cost

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in the short term, in the long term,

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the benefits might outweigh this cost if we,

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measure them in terms

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of sustainable development in the future and so on.

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So avenues for future research, I think in this are,

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are very important because

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so are are very important to push.

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Why? Because I think that our goal as a society,

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as researchers and policy makers should be

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to promote equality of opportunity,

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but while also increasing economic efficiency, right?

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So, I think more

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and more evidence is needed to understand this relationship.

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One aspect which I would like to highlight is, for example,

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the mechanism behind, so for the research is probably needed

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to unpack the specific mechanism

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through which social mobility impacts economic performance

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and development and so on.

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So recently, what we are studying on is to measure,

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for example, factors like, innovation

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and also productivity.

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So we have one study looking at, European regions,

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and we measure, the impact

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of intergeneration mobility in European regions on the long

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run innovation potential measured by patents

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that are registered in, in this regions.

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So it's a very similar concept as in this study

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for Latin America, but for Europe and focused on innovation.

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And this is one channel, for example, of the relationship.

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And another aspect of course is policy evaluation.

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So which policies, behind the improve

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that can improve social mobility, also,

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contribute to, to, to, to help to gain more efficiency

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and to, break, let's say this, this trade off.

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Um, I think this is very important.

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Um, for example, our early childhood intervention,

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more effective than later life, life intervention.

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And there is a lot of research on this

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by brilliant scholars.

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And, so I think that this is the channel that we,

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that we, will also have to look deeper

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and deeper in the future to understand more

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and more about this relationship.

Exploring the Link Between Social Mobility and Economic Development in Latin America

00:00:00 - Social intergenerational and mobility is generally a measure of how likely it is for people to change their socioeconomic status compared to their parents. So this can generally be measured by income, education, occupation, or other measures, but what is important about it is that is usually of understood as a key indicator of equality of opportunity within the society. So higher social mobility suggests that individuals have a greater chance of achieving, economic success regardless of the family background.

00:00:33 - where opportunities are more equally distributed. What we do in our studies is to analyze social mobility as a driver of economic development. so specifically what we do is we look at how social mobility has impacted economic development in Latin America over the last 80 years, and our focus is on intergenerational educational mobility. So basically we could say how likely is it for someone to move up in terms of education, no matter what background the parents have. Okay. we do this doing an empirical analysis,

00:01:09 - Latin American countries. We add up with a huge data set, including more than 1 million individuals, and these individuals represent basically the, the whole, region. And we use this data to see if areas where people had better chances of improving their education ended up being, more economically developed, when those individuals that experienced this higher mobility were then,

Exploring Intergenerational Mobility and Economic Development

00:01:39 - The literature on intergenerational mobility has a long history in sociology, economics, also other disciplines and, and, and hi historically also philosophies, talked about this in past, in economics, we could mention, for example, the early studies by Becker Homes, for example, or more recently, Raach Che and his co-authors with their Opportunity insights project. And we could also mention, because they are very connected to, to the, the,

00:02:11 - that we are doing some theoretical models, by, or that galler and co-authors that create already a link in the theoretic models between accumulation and allocation of human capital and economic development. So what some studies have done, and, and we also did the, a previous study where we also did something similar is to, investigate this relationship somehow empirically by testing the relationship between equality of opportunity,

00:02:45 - or economic development. So some studies did it descriptively, for example, of cross countries like our previous study and, and some others. Some others in more specific context, like for example, the US labor market or others, Even by evaluating, for example, empowerment programs in village, in developing countries. So what, what, what we did now and what the contribution of our study is, is that we provide the first large scale analysis we could say,

Analyzing Intergenerational Mobility: A Comprehensive Dataset Approach

00:03:16 - over a long time span, taking a a across regional analysis within countries, and also diff using different measures of economic development. And this way we are able to contribute to this literature by having this, this new results on the relationship. I think one of the contributions was also that we use a unique dataset that we put together from different sources. So the dataset, with which we measure, intergenerational mobility,

00:03:48 - representative household service from 10 different countries. We harmonize these data to ensure comparability across countries, surveys, and over time. And, as I said before, overall it's, over 1 million of individuals in these data sets, which are representative of the sample of almost the entire entire region. with these data sets, we measure, intergeneration mobility in education for individuals born between 1940 and 1989, using

00:04:19 - Like, for example, the correlation between parents and children's years of schooling as a measure of of social mobility. And, and this is a also approximate or give us an idea of equality of opportunity in a society. And we do this for 52 subnational regions within these 10 countries. Then we integrate this data set with several other indices for economic development. of these 52 regions that we either estimate ourselves,

Spatial Variations in Social Mobility and Economic Development in Latin America

00:04:50 - poverty rates, and so on, or that we retrieve from different surveys. So for, sources, sorry, for example, nighttime luminosity measured from satellite images as a measure of development. And so integrating this data set, we are, this data sets, we are able to measure the relationship between social mobility, intergeneration, mobility and, economic development with this data. Finally, we are able to offer a, I would say, quite exhaustive geographical overview of how,

00:05:22 - to the parental educational background in Latin America. and the, the, the variations that the analysis reveals are quite interesting, I think both within and across countries. So there are some clear spatial patterns, for example, there are consistently higher levels of social mobility in some pan countries, for example, in the southern part of South America, Chile and Argentina, and, lower levels in, in, northern regions like Central America, for example.

00:05:55 - country heterogeneity. So also within countries there's a great degree of, variation, across regions. For example, again, the example of Chile, it exhibits lower, lower up mob upward mobility in the north compared to the south, for example, sorry, lower in the south compared to the north, or in Brazil. It's the other way, way around. So a lower mobility in the north compared to the south.

Misallocation of Talent and Social Mobility Mechanisms

00:06:25 - and which we found very interesting. The mechanism which are behind theoretically, let's say we should start by, I think we should start with the key theoretical mechanism, which are behind, which should be behind the relationship, namely that with lower social mobility and no equality or lower equality of opportunity, there is a situation which can be, called, misallocation of talent. So if only, let's say the, the kids of, advantage

00:06:58 - and have better occupations and so on, then we lose a lot of talent, of individuals that maybe are very talented, but they grew up in poor families and disadvantaged households and cannot achieve this, to, to, to improve their skills, as their, talent would would require to become, doctors, engineers and so on.

00:07:29 - with improving social mobility, we have a better allocation of talent. We have a better match between skills, actual skills of individuals and their education and their, job opportunities and so on. And the whole society benefits of it, of course, because we then have the best doctors, the best engineers and so on. So this is the mechanism behind and, if this is, but, but it could also, there could also be a trade off potentially.

Equity and Economic Development: The Case for Enhancing Social Mobility

00:08:00 - to get more, equality. So it, it could also be the, the fairness aspect, which is more important. And then we would like to improve social mobility because of fairness considerations, but we would know about the trade off that exists. Now, our, the key message of our findings, I would say is the following. There is no trade off between equity and efficiency regarding social mobility, but the other way around improving social mobility is consistently associated

00:08:30 - So what we find is the regions that had higher social mobility in the past have then higher levels of economic development later on when the children that experienced this higher mobility and more equality of opportunity, are active on the labor market and contributing to the economy. And the main channel seems actually to be, rather than the accumulation Of human capital. So generally rising educational opportunities for all,

00:09:02 - So the opportunities for improvement that rise for children from disadvantaged families, and this is what contributes to, to economic development probably because more talents are, are, or more pot more talented people, children have the possibility to develop these talents. The main conclusion, let's say, that we could say of our study is that improving social mobility is not just fair and we want it because it's fair

Investing in Social Mobility: Economic Benefits and Future Research Directions

00:09:33 - but also it's a smart investment from an economic point of view. So we actually improve the life, the life of others, and there are positive externalities when we improve social mobility. So, this means that policies promoting social mobility are not just socially desirable, but they're also economically beneficial, right? And, hence we have to take this into account. So even if these policies may create some considerable cost

00:10:04 - the benefits might outweigh this cost if we, measure them in terms of sustainable development in the future and so on. So avenues for future research, I think in this are, are very important because so are are very important to push. Why? Because I think that our goal as a society, as researchers and policy makers should be to promote equality of opportunity, but while also increasing economic efficiency, right? So, I think more and more evidence is needed to understand this relationship.

00:10:38 - the mechanism behind, so for the research is probably needed to unpack the specific mechanism through which social mobility impacts economic performance and development and so on. So recently, what we are studying on is to measure, for example, factors like, innovation and also productivity. So we have one study looking at, European regions, and we measure, the impact of intergeneration mobility in European regions on the long

Exploring Policy Impacts on Social Mobility and Innovation

00:11:10 - that are registered in, in this regions. So it's a very similar concept as in this study for Latin America, but for Europe and focused on innovation. And this is one channel, for example, of the relationship. And another aspect of course is policy evaluation. So which policies, behind the improve that can improve social mobility, also, contribute to, to, to, to help to gain more efficiency

00:12:02 - I think this is very important. for example, our early childhood intervention, more effective than later life, life intervention. And there is a lot of research on this by brilliant scholars. And, so I think that this is the channel that we, that we, will also have to look deeper and deeper in the future to understand more and more about this relationship.

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