An Examination of the Usability of Identification Strategies by Chetty and Hendren in a European Context

Both policymakers and researchers are interested in understanding how geographical factors influence individuals’ life opportunities and how to best study this relationship. A key question is whether the place of residence affects individuals’ future outcomes, and if so, why.

Chetty and Hendren (2018) presented a method for analysing such neighbourhood effects by comparing children who move at different ages. The idea is that children who move at an earlier age are exposed to their new environment for a longer period of time, thus creating a natural variation in their upbringing. An important assumption in their study is that families’ choices of residential areas do not change systematically based on the child’s age at the time of moving.

Their method has proven effective in the United States and has also been applied in studies of developing countries. However, it remains uncertain whether it can be applied to Northern European countries, where the mobility between residential areas is generally lower and income differences are less pronounced.

To investigate this, we analysed administrative data from Sweden and the Netherlands. Both countries conduct national cognitive tests at an early age, enabling us to study which families choose to move and whether this decision changes depending on the child’s age.