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

Ilan Tojerow, Frédéric Panier and Andrey Fradkin
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Frédéric Panier: Stanford University
Andrey Fradkin: MIT Sloan School of Management and Airbn

No 294, 2016 Meeting Papers from Society for Economic Dynamics

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.

Date: 2016
New Economics Papers: this item is included in nep-ias
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Working Paper: Blame the Parents? How Financial Incentives Affect Labor Supply and Job Quality for Young Adults (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:294

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