In Episode 5 of Series 4 of the DIAL Podcast we're in conversation with Andreas Peichl, Professor of Macroeconomics and Public Finance at the University of Munich and Principal Investigator of a DIAL project looking at the impact of childhood circumstances on individual outcomes over the life-course (IMCHILD).

Transcript

Christine Garrington 0:00

Welcome to DIAL a podcast where we tune in to evidence on inequality over the life course. In series four, we're looking at what's been learned from DIAL projects about how and when inequality manifests in our lives, and what its longer-term consequences might be. Today, we're delighted to be joined by Andreas Peichl, Professor of Macroeconomics and Public Finance at the University of Munich, and Principal Investigator of a DIAL project looking at the Impact of Childhood Circumstances on Individual Outcomes over the Life-Course. So, welcome, Andreas, thank you very much for joining us. And I wonder if you can start by telling us a bit about what this project has been investigating and why?

Andreas Peichl 0:39

So the project IMCHILD the Impact of Childhood Circumstances on Individual Outcomes over the Life-Course, had the aim to investigate how early decisions that usually parents make for their children's are really at the beginning of life, the early childhood, how these what we call circumstances for the child. So this is something that children typically cannot influence. Because these are decisions by made mostly by parents, how these circumstances affect decisions later in life. So for example, the transition to adulthood, be it educational or occupational choices, family formation, or later labour market outcomes. And the really, the idea was to see whether we find that the early childhood circumstances matter later in life. And then the next question, if this is the case, was what are the causal links? What are the mechanisms for this? And also, what can policymakers do about it if they aim at achieving something like equality of opportunity? So what can policymakers do to to level the playing field, so to say, later in life.

Christine Garrington 1:54

Now, I'm interested to know as we record this conversation, COVID is something we certainly seem to be learning to live with right now, although COVID wasn't an issue, when you started this project, it certainly became one. And you've taken time to consider which children have been most affected by school closures for example. Can you tell us a bit about what you found there?

Andreas Peichl 2:14

First, what we found is that in any country that we looked at, and especially in Germany, that was the main focus of this part of the analysis, but we also looked at other countries. That low achieving students, so students that were already not doing too well, in school, they were affected the most. And at the same time, students from non academic parents and lower socioeconomic status backgrounds, they were also affected the most. So sometimes, it's a combination of those two factors that are the same children, so low achieving, and low socio-economic status, but it's not exclusive. So, in general, low achieving students and lower socio-economic background, especially non-academic parents, those were the kids that were affected the most by, for example, school closures. But in general, we see that there was a large decrease in learning time for all students in school. And so basically, the whole cohort, were really affected by this.

Christine Garrington 3:21

Right and, of course, as we, as we say, as we talked about learning to live with COVID, there are going to be already are, if you like longer term implications of this for children, educators and policymakers who are keen to ensure that any pre-existing inequalities don't become more deeply ingrained. Have I got that right?

Andreas Peichl 3:42

Yes. So it's, it's really through it, we need to make sure that these existing inequalities don't become large. And right now, it looks as if they are becoming much larger actually. And we also see that this has long term impact. So if you lose some part of a school year, so for example, if you lose 1/3 of a school year, this, we can find or in the past, this was associated with a drop in lifetime income of 3, 4 or 5%. And so this, this can have huge implications for the generation of students affected. And so it's really important because we will have to live with COVID. And we need to make sure that we don't have to close schools, again, by investing in digital infrastructure and so on and making it possible that even when people are at home or this case, also not only for COVID, but also for other reasons that they can still participate in schooling. So this will be really important.

Christine Garrington 4:46

Yes, indeed. Let's move away from COVID. One of the project's key aims was to investigate how the circumstances as we said that a child grows up in influences some of the most important decisions they make later on, you mentioned in your first answer about education and work and all of those key decisions that can take us down a certain path. Tell us a bit more about what you were hoping to get to really sort of get to grips with here.

Andreas Peichl 5:13

So the starting point for research is rooted in the philosophical theories of distributive justice. And they, and also from an economic point of view, there's always the question, how to tackle inequalities. And in general, there are three ways to tackle inequalities. One is, the typical way is what we call redistribution. So this is, after all, the labour market outcomes, for example, are observed and we put a taxes and pay transfers and benefits to people to redistribute incomes. But the philosophical question then is, when we do this, how much do we want to redistribute how much inequality in the labour market do we want to have? And we know that for efficiency reasons, it's not good to have perfect equality, because then people don't have incentives to work and or to earn income. But we also know that very extreme inequality is not very good. But we don't know exactly where this optimal level is. But what we know is that there are other inequalities, where it's clear that this is something that we don't want. And this is what we in one paper, we call it unfair inequality, or this is inequality, where it's beyond your control your your poor, because there's something that you cannot influence. And this is what we wanted to investigate in this project. What are these circumstances, that children but also people later in life, have that make them for example, poor or rich? So is it the parental background, or we are in some work, we're also we're looking at the genetic endowment of people, but also other things, the places where you grow up could matter. And then it's important for policymakers, if you start tackling these inequalities already early in life, then maybe you don't need so much redistribution later in life. Because if there's a level playing field, and everybody has the same chances to achieve incomes, then typically inequalities in the labour market will be much less pronounced as they are today. So it was really the aim to see how much of the inequality that we observe today, for example, in labour earnings, labour market outcomes, how much of this can be explained by by early childhood circumstances already?

Christine Garrington 7:35

And what were the key things to emerge from the work that you did?

Andreas Peichl 7:38

The first thing is that, that we came up with some novel ideas and measures how to exactly measure this, this unfair bit of inequality to really disentangle this, not only in theory, but also empirically and, to some extent, also, using some some novel methods. For example, machine learning and big data ideas, in some ways or another. But also, the other thing was really trying to auto assemble also data, large datasets in paper in Sweden, really looking over several generations to see what is really the, the impact of these childhood circumstances. But what we see is really that childhood matters a lot. I mean, it's not surprising, everybody, I think, if you if you think back of your own childhood, or if you're, if you're having kids, you see how much impact parents can have have on children. And if there's inequality in let's say, how good parents are or how parents treat their children, then it's clear that this will lead to inequalities down the road. And so but I think what what's really interesting in our research was to put numbers on this to really see which inequalities seem to matter more and which maybe to a lesser extent, and then also trying to get at the main mechanisms and sort of the causal links between what it was what is it really that has an impact on on outcomes of children later in life?

Christine Garrington 9:15

And you wanted to really sort of dig deep and see how those decisions that we've been talking about translate into later, later life social and economic outcomes, didn't you? What did you see there?

Andreas Peichl 9:27

So yeah, we see that it's really that these these childhood circumstances matter in later life so it's, they matter directly in early childhood and then when when kids go to school or to high school, so really educational choices, but also educational performance is affected by these early childhood circumstances and then it continues, it's it's occupational choices, that matter it's but it's also we see impact on family formation - when to marry when to have children be it earlier or later in life, this is affected. And it matters for for labour market outcomes for career aspirati...