Blame the Parents? How Financial Incentives Affect Labor Supply and Job Quality for Young Adults

Andrey Fradkin (), Frédéric Panier () and Ilan Tojerow
Additional contact information
Andrey Fradkin: MIT Sloan School of Management
Frédéric Panier: McKinsey&Co

No 9304, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Young adults entering the labor force typically have little access to unemployment insurance or other formal insurance mechanisms. Instead, they rely on family insurance in the form of parental support to smooth consumption. We study the labor market response of Belgian young adults to decreases in parental support caused by parental job displacements. Our estimates correct for unobserved heterogeneity by using the timing of parental shocks before and after labor market entry. We find that a child whose parents lose a job prior to the child's labor market entry is, on average, induced to work 6% more in the 3 years following labor market entry than a child whose parents lose a job after the child's entry (where labor market entry is defined as the end of the child's full-time education). This effect is concentrated on the extensive margin, meaning that the child finds a job faster, and disappears within four years of entry. We find no evidence that parental support affects the quality of the initial job that entrants find.

Keywords: job quality; first-time job seekers; unemployment insurance; labor supply; family insurance (search for similar items in EconPapers)
JEL-codes: J13 J22 J64 J65 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2015-08
New Economics Papers: this item is included in nep-dem, nep-ias and nep-lab
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Published - published as 'Blame the Parents? How Parental Unemployment Affects Labor Supply and Job Quality for Young Adults'in: Journal of Labor Economics, 2019, 37 (1), 35-100

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Working Paper: Blame the Parents? How Financial Incentives Affect Labor Supply and Job Quality for Young Adults (2016)
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