In OECD countries, the correlation between a poor child’s capacity to become a wealthy adult and the entrepreneurial dynamism of their country is comparable to that measured with educational spending. This is the central finding of a study published in 2026 by Causa, Nguyen and Tanaka, which covers 29 member countries. This is not a trivial discovery. It displaces a debate we thought we understood.

Social mobility is almost always told as a story about schools. More teachers, better universities, more scholarships: this narrative has intellectual coherence and profound political legitimacy. For the past thirty years, it has also absorbed most of the reformist energy of European governments. What the OECD study shows is that this narrative is incomplete. Markets where new businesses can actually emerge — where barriers to entry are low, where established actors cannot durably lock in their position — are also the markets that allow the least advantaged children to rise.

The Essential Points

  • An OECD study (Causa, Nguyen and Tanaka, 2026) covering 29 countries establishes a significant positive correlation between entrepreneurial dynamism and intergenerational income mobility.
  • The indicators used measure concrete barriers to entry in goods and services markets, ease of business creation, and effective competitive pressure on incumbent firms.
  • Nordic countries combine both factors: high educational spending and relatively open goods markets. But across all 29 countries, competitive dynamism predicts mobility in a manner similar to education.
  • The direct political consequence is rarely assumed: regulations protecting established businesses have a social cost that is difficult to account for but real—that of blocked mobility.

The Social Elevator Does Not Only Pass Through School

The image of the “great educational pump” is seductive: massive investment in public education would allow each generation to surpass the previous one, regardless of its origins. This conviction has structured social policies in most European countries since the end of the Second World War. It is not wrong. But it is incomplete.

The study by Causa, Nguyen and Tanaka uses intergenerational earnings elasticity as its central measure: the higher this coefficient, the more a child’s income depends on their parents’ income, and the less mobile the society. Across 29 OECD countries, the authors compare this coefficient with several types of indicators, notably the intensity of educational spending on one hand, and various measures of entrepreneurial dynamism on the other.

The result is that these two series of indicators predict mobility in a notable way. It is not that education matters less. It is that the structure of markets where individuals will exercise their skills once trained matters just as much. A graduate entering a market locked down by established actors does not have the same prospects as an identical graduate entering a contestable market.

This distinction between human capital and the ability to leverage it is important. It explains situations that the educational lens alone cannot resolve: why certain countries that spend more per student sometimes display lower mobility than countries that invest less but have more dynamic markets. The answer is not in the classroom. It is in the structure of the economy into which one exits that classroom.

What “Entrepreneurial Dynamism” Means in Concrete Terms

A misunderstanding must be avoided. The entrepreneurial dynamism measured in the study is not an indicator of startup growth in the Silicon Valley sense. It is also not a score of “economic freedom” in the ideological sense. It is something more precise and more mundane: the effective ease for a new firm to enter a market, to compete with incumbent actors there, and to exit without excessive cost if it fails.

The indicators used derive largely from OECD work on product market regulation (PMR). These indicators measure regulatory barriers to competition broadly construed, across more than 1,000 criteria covering areas such as governance of public enterprises, licensing procedures, state control, and foreign trade. They also include elements on administrative burdens at entry — what prior authorizations are necessary to enter certain sectors, or whether public enterprises benefit from protections that exempt them from competition. Professional regulations closing access to certain professions are also part of the picture. It should be noted that the precise measurement of the number of days and procedures necessary to establish a business falls under the World Bank’s “Doing Business” indicators (now “Business Ready”).

These barriers are not socially neutral. They systematically favor those who already have capital, connections, and knowledge of the system. Creating a business in a country where administrative procedures take six months and mobilize a network of lawyers is an adventure accessible to children from wealthy families and business executives. It is far less accessible to the son of a factory worker or the daughter of a first-generation immigrant who worked at a supermarket checkout. Regulation is never socially neutral. It has beneficiaries and victims, even when drafted with the best intentions.

This is the mechanism the study brings to light: the lower the barriers, the stronger social mobility is. Not because everyone creates a business, but because contestable markets create more opportunities for everyone, force incumbent actors to better compensate and treat their employees, and allow talented individuals from modest backgrounds to leverage that talent without the usual requirements.

Nordic Countries Do Not Prove What People Believe

The usual reaction to this type of argument is to point to Scandinavian countries: they have both strong social mobility, very substantial educational spending, and heavily regulated labor markets. Therefore, the key would be public investment, not market liberalization. The argument is often presented as decisive. It is not quite.

What the data show is that Nordic countries combine both favorable factors. They invest massively in education, but they also have goods and services markets relatively open to competition, among the lowest administrative costs for business creation in the OECD, and bankruptcy procedures that allow an entrepreneur who fails to quickly restart. Strong Nordic social mobility is not only the product of free school and generous benefits: it is also the product of markets where a baker can open a bakery without spending two years navigating administrative channels.

France, by comparison, has made different choices. It spends massively on education and social protection. According to the latest OECD PMR indicators (2023/2024), France performs better than the OECD average on the overall indicator. Certain sectors remain more restrictive, however — notably professional services and certain regulated professions — which contributes to relatively low social mobility for a country at this level of development, a fact documented by several successive OECD reports. Latin America, for its part, illustrates conversely what oligopolistic markets produce over decades: structural inequalities that resist all social programs.

The Invisible Social Cost of Monopoly Rents

There is an accounting bias in the public debate on regulation. When a government reduces its education spending, everyone sees the consequences: fewer teachers, overcrowded classrooms, visible degradation of results. The cost is immediate and easily measured.

When the same government maintains or strengthens regulatory barriers that protect established firms against competition, the cost is invisible. It dissolves into a multitude of individual decisions impossible to attribute to a precise cause: the entrepreneur who did not attempt the venture because the procedures seemed insurmountable, the young employee who could not negotiate a raise because their employer had no fear of competition from a new rival, the small town whose commercial fabric impoverished because zoning rules prevented new actors from establishing themselves.

This cost has no budget line. It is the subject of no parliamentary report. Interest groups benefiting from regulatory protection have permanent spokespersons and resources to defend their positions. Entrepreneurs never born, businesses never created, employees who never benefited from competition between employers: this lobby does not exist.

This is precisely what the OECD study helps make visible. By statistically establishing the link between entrepreneurial dynamism and social mobility across 29 countries, it puts a price on what no one wanted to account for. This price is measured in blocked destinies, broken elevators, wasted talents.

What European Reformers Tend to Neglect

The European Union has made considerable progress in integrating goods markets since 1993. But services markets, which today represent more than 70% of employment in most member countries, remain fragmented and often protected. The 2006 Services Directive, weakened during its political passage, never produced the level of integration its designers envisioned. Regulated professions, local markets for personal services, distribution, crafts: so many sectors where national and local barriers persist, often in the name of consumer protection or quality, but with regressive distributive effects.

It is no accident that social mobility policies struggle to produce their effects in countries where these sectors are most closed. The graduate leaving vocational school with training in electrical work does not enter a neutral market: they enter a market where accreditations, recognized qualifications, and existing employer syndicates define conditions of access, often to the detriment of those who lack a network. There is an irony here that the educational debate generally refuses to examine. Much energy is spent debating what happens in the classroom, and far less questioning what becomes of the graduate once they leave.

Structural market reforms are politically thankless precisely because their beneficiaries are diffuse and future, while their opponents are concentrated and present. This is a classic problem of political economy, but it takes on particular dimensions when one understands that maintaining these protections has a cost in social mobility. An elected official voting against a reform of taxi regulation, paramedical professions, or food distribution is not only voting in favor of established interests: they are voting, statistically, against the mobility of the least advantaged children.

The Two Levers Do Not Oppose, But Do Not Automatically Add Up

It would be too simple to conclude that freedom to entrepreneurship replaces educational investment. Both are necessary, but their combination is not mechanical. A very open market in a country with low human capital does not produce greater mobility: it produces intense competition where the better endowed dominate even more quickly. This is the case in many emerging countries that liberalized their markets without investing in basic education. Competition without skills is not mobility.

Similarly, high educational spending in a country with closed markets produces graduates who can only leverage their training by accessing established firms, whose doors are distributed according to family networks and elite schools. This is a fairly accurate description of what economists call “credentialism”: the race for diplomas as a substitute for real equal opportunities in the labor market.

What the OECD study contributes is empirical demonstration that these two dimensions are complementary, not substitutable. Policies that maximize social mobility are those that combine quality educational investment and sufficiently contestable markets for that investment to translate into real opportunities. This is not a position of ideological principle: it is what data from 29 countries over several decades show.

One open question remains, and it is practical: in a political context where public deficits constrain educational spending, and where structural reforms are unpopular, which of the two levers is most actionable? The answer varies by country. But for European governments seeking to improve social mobility at constant budget, research by Causa, Nguyen and Tanaka suggests an angle often neglected: look less toward classrooms, and more toward business registration offices.

Sources

  1. Causa, Nguyen and Tanaka (2026), Intergenerational social mobility across OECD countries: Does the apple fall far from the tree? (Working Paper No. 1858), OECD — https://www.oecd.org/en/publications/intergenerational-social-mobility-across-oecd-countries_6d76ec2a-en.html
  2. Causa, Nguyen and Tanaka (2026), How far the apple falls: Evidence on social mobility across OECD countries, VoxEU/CEPR — https://cepr.org/voxeu/columns/how-far-apple-falls-evidence-social-mobility-across-oecd-countries
  3. OECD, Product Market Regulation (PMR) indicators — https://www.oecd.org/en/topics/product-market-regulation.html
  4. OECD, PMR Country Note France (2024, revised Dec. 2025) — https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/product-market-regulation/France_PMR%20country%20note.pdf
  5. World Bank / Trading Economics, Employment in Services EU 2023 — https://tradingeconomics.com/european-union/employment-in-services-percent-of-total-employment-wb-data.html
  6. IDEAS/RePEc, List of OECD working papers — https://ideas.repec.org/s/oec/ecoaaa.html