Abstract
We estimate the causal effect of parents' unemployment on unemployment among their children in their own adulthood. We use administrative data for Austrian children born between 1974 and 1984 and apply an instrumental variables (IV) identification strategy using parents' job loss during a mass layoff as the instrument. We find evidence of unemployment inheritance in the next generation. An additional day of unemployment during childhood causally raises the average unemployment days of the adult child by 1 to 2%. The greatest effects are observed for unmarried parents, young children, children of low-education parents, and in families living in capital cities. We also explore various channels of intergenerational unemployment, such as education, income, and job matching by parents.
Highlights
Intergenerational mobility and persistence in social or labor market outcomes are important factors for equal opportunity
We address all these three research gaps using long-term administrative data on Austrian workers and instrumental variables strategy based on mass layoffs
Using comprehensive Austrian Social Security Data and an instrumental variables approach, we show that 10 additional days of average yearly parental unemployment during the childhood of the offspring increase the adult child’s yearly average days of unemployment by 1.2 to 3.5 days, or 9 to 24 percent of the mean
Summary
Intergenerational mobility and persistence in social or labor market outcomes are important factors for equal opportunity. Many studies have been conducted on intergenerational persistence in areas like income (Blanden, 2019), education, and health (Black and Devereux, 2011), but studies on intergenerational persistence in unemployment are rare, for three reasons: i) suitable data on parents and children are not readily available, ii) no effective identification strategy has been developed, and iii) there is no clear-cut channel by which unemployment in one generation is transferred to the We address all these three research gaps using long-term administrative data on Austrian workers and instrumental variables strategy based on mass layoffs. We identify children’s educational career as one plausible transmission channel of intergenerational unemployment, but it is not the only one: Even in situations where there are no educational consequences of parental unemployment, children still suffer higher unemployment rates
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