Family, Community and Long-Term Socio-Economic Inequality: Evidence from Siblings and Youth Peers

Abstract

Using administrative data for the population of Danish men and women, we develop an empirical model which accounts for the joint earnings dynamics of siblings and youth community peers. We provide the first decomposition of the sibling correlation of permanent earnings into family and community effects allowing for life-cycle dynamics and extending the analysis to consider other outcomes. We find that family is the most important factor influencing sibling correlations of earnings, education and unemployment. Community background matters for shaping the sibling correlation of earnings and unemployment early in the working life, but its importance quickly diminishes.