Headlines: February 9th, 2006

The neighbourhood in which a child is brought up has far less impact on educational and employment outcomes in later life than the young person’s family background and, according to research published today, the effect of the area where a child lives is getting weaker.The research is published in the Royal Economic Society’s “Economic Journal” and is based on Norwegian data by Oddbjorn Raaum, Kjell Salvanes and Erik Sorensen, who suggest that the decline in the impact of the neighbourhood is driven by policies designed to increase equality of opportunity, particularly education reforms.

Their study, “The Neighbourhood is not what it used to be”, says it is well established that the family is the most important factor influencing a child’s school performance and educational attainment and earnings as adults. Parental influence comes in a number of ways such as time and money invested in education, the transmission of cultural and social skills and genetic endowment. The area where parents locate their family is also expected to influence children’s school and adult performance.

This research looked at whether the effect of family and neighbourhood had changed over time and compared the influence on children growing up around 1960 and around 1970. They found that family background plays as strong a part in explaining earnings and educational achievement in Norway as it does in the UK and the United States. The importance of family in determining adult earnings and education is as strong for the children from 1960 as for those from 1970.

They expected the impact of the neighbourhood to be much weaker but also discovered that its effect has been dropping over time and was negligible for the children growing up around 1970. The researchers offer no rigorous test of why this has happened but single out the expansion of local government services in general, and education reform in particular, as important candidates.