Peking University, April 1, 2024: The Guanghua School of Management recently hosted Prof. James Heckman, a distinguished economist and Nobel Laureate of 2000, for an insightful lecture on the dynamics of social mobility, inequality, and the effectiveness of welfare state policies. The event, moderated by Prof. Li-an Zhou, director of PKU’s Economics and Management Faculty, challenged the audience to reconsider the effectiveness of the Nordic welfare model, and its applicability to diverse economies such as the United States and China.


The discussion began with an examination of the Nordic welfare states, including Denmark, Sweden, and Norway, as benchmarks for reducing inequality and enhancing social mobility. Prof. Heckman critically assessed the direct applicability of these models to countries with different economic and social fabrics, initiated a deep dive into the factors behind their success.


Understanding Social Mobility through the Gatsby Curve

He introduced the Gatsby Curve, a concept that illustrates the relationship between inequality and intergenerational mobility across countries. The curve suggests that countries with lower inequality, like the Nordic states, also have higher social mobility. Prof. Heckman examined this correlation, questioning whether it is the welfare policies themselves that lead to reduced inequality and increased mobility, or if other factors are at play.

The Role of Family and Social Policies

A significant focus was placed on the role of families in passing advantages across generations. Prof. Heckman pointed out that beyond financial inheritance, families play a crucial role in shaping children's futures through education, encouragement, and access to opportunities. He emphasized the importance of understanding how families and social policies interact to influence social mobility. 

Insights from Danish Data

Using comprehensive Danish registry data, Prof. Heckman provided an in-depth analysis of the factors influencing social mobility and inequality in Denmark, highlighting the significant role of progressive tax and transfer policies over human capital policies (e.g., education and health services).

Universal Access and Utilization

Despite Denmark's generous welfare policies, such as its universal access to high-quality education, healthcare, and other services, Prof. Heckman revealed that more affluent and educated families are better able to exploit these services, highlighting the persistent impact of the "Matthew effect" and the critical role of family in navigating public resources.

Neighborhood Effects and Social Sorting

A significant part of Heckman's findings relates to the importance of social sorting and neighborhood effects in determining social mobility. He demonstrated that choices made by families, including where to live, how affluent families tend to cluster in neighborhoods with better schools and resources. This sorting into neighborhoods, coupled with the quality of peers and schools in those areas, significantly impact children's future opportunities, regardless of the universal welfare policies in place.

Rethinking Social Mobility: The Concept of Lifetime Wealth

The lecture proposed evaluating social mobility through "lifetime wealth" rather than traditional income metrics. This comprehensive approach considers future income, uncertainties, and the nuanced impacts of social policies over time.


In the following Q&A session, Prof. Heckman engaged with a wide range of topics, from early childhood development to the societal implications of housing markets. He advocated for early childhood programs focusing on enhancing parent-child engagement as a cost-effective means to improve societal outcomes.


Prof. Heckman's lecture at the Guanghua School of Management provided an in-depth analysis of social mobility, challenging prevailing assumptions about the welfare state model. His examination of Danish data, coupled with his findings on the influence of family roles and neighborhood effects, offered a comprehensive framework for policymakers and researchers, encouraging a multifaceted approach to address societal inequalities.


In addition to delivering a thought-provoking lecture, Prof. Heckman engaged in conversations with faculty members from the Department of Applied Economics at the Guanghua School of Management and the Center for Social Research at Peking University. This in-person exchange provided an invaluable opportunity for the academic community at PKU to discuss the latest research and advancements with Prof. Heckman.


The Guanghua Thought Leaders Series, initiated by PKU Guanghua School of Management, actively serves as a vibrant platform for students to engage with distinguished figures from across the globe, including pioneering academics, industry executives, and government leaders. Previous speakers have featured internationally renowned individuals such as Nobel laureate Dr. Robert Wilson, former President of the European Commission and Prime Minister of Italy Romano Prodi, and Starbucks founder Howard Schultz. This series not only fosters cross-cultural exchange and learning but also embodies the school's commitment to cultivating outstanding talents with global perspectives and leadership qualities.

Source: PKU Guanghua School of Management