Consequences of parental job loss on the family environment and on human capital formation-Evidence from workplace closures

Eva Mörk,Anna Sjögren,Helena Svaleryd

doi:10.1016/j.labeco.2020.101911

Eva Mörk, Anna Sjögren + Show 1 more

Open Access

https://doi.org/10.1016/j.labeco.2020.101911

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Abstract

We study the consequences of mothers’ and fathers’ job loss for parents, families, and children. Rich Swedish administrative data allow us to identify workplace closures and account for non-random selection of displaced workers. Our main conclusion is that effects on children are limited, although parents and families are negatively affected in terms of parental health, labour market outcomes and separations. We find no effects of parental job loss on childhood health. While educational and early adult outcomes are unaffected by paternal job loss, we find small negative effects of maternal job loss, which contradicts some of the earlier evidence. Limited effects on family disposable income suggest that welfare institutions successfully insure families, in particular, those with low income, thus protecting the family environment. A dual earner norm and strong incentives for female labour supply may contribute to the absence of positive effects of maternal job loss.

Highlights

We study the consequences of job loss for parents, families, and children
To estimate a placebo effects, we focus on children who experienced parental job loss after the outcome of interest was realized; for example, for high school completion at age 20, the pre-treatment effect is measured for individuals who were exposed to parental job loss at ages
Since it is likely that the effects of parental job loss on children occur via effects on the parents and the home environment, we first present estimates of the effects on the displaced parent and on the family

Summary

Introduction

We study the consequences of job loss for parents, families, and children. Firm start-ups and closures are an integral part of the process of economic growth and restructuring, generating overall gains. Workers who lose their jobs pay a price, suffering long-term negative consequences on future employment, earnings, health, and marriage stability.. Workers who lose their jobs pay a price, suffering long-term negative consequences on future employment, earnings, health, and marriage stability.1 Because these factors are likely to affect the family environment in which children grow up and parental investments in child human capital, some of the burden of this restructuring process may be transmitted to the children of affected workers. Understanding this transmission is important since childhood human capital development has consequences for childhood wellbeing and long-run socio-economic status.

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