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The Intergenerational Effects of Worker Displacement

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  • Ann Huff Stevens
  • Marianne Page
  • Philip Oreopoulos

    (Department of Economics, University of California Davis)

Abstract

This paper uses variation induced by firm closures to explore the intergenerational effects of worker displacement. Using a Canadian panel of administrative data that follows almost 60,000 father-child pairs from 1978 to 1999 and includes detailed information about the firms at which the father worked, we construct narrow treatment and control groups whose fathers had the same level of permanent income prior to 1982 when some of the fathers were displaced. We demonstrate that job loss leads to large permanent reductions in family income and small increases in mobility and divorce. Comparing outcomes among individuals whose fathers experienced an employment shock to outcomes among individuals whose fathers did not, we find that children whose fathers were displaced have annual earnings about 9% lower than similar children whose fathers did not experience an employment shock. They are also more likely to receive unemployment insurance and social assistance. The estimates are driven by the experiences of children whose family income was at the bottom of the income distribution, and are robust to a number of specification checks. This work was completed while Oreopoulos was a Statistics Canada Research Fellow and member of the Family and Labour Studies Division of Statistics Canada. The financial support of the National Science Foundation is gratefully acknowledged. We also wish to thank Miles Corak, and seminar participants at Brown University, MIT, Princeton University, Stanford University, Yale University, the University of California Berkeley, UCLA, the University of Toronto and the NBER summer institute for their helpful comments.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 521.

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Length: 43
Date of creation: 01 Aug 2005
Date of revision:
Handle: RePEc:cda:wpaper:05-21

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Keywords: worker displacement;

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References

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  1. Miles Corak & Andrew Heisz, 1999. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 504-533.
  2. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, vol. 77(2), pages 155-184, August.
  3. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
  4. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May.
  5. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-18, December.
  6. Oreopoulos, Philip, 2007. "The Long-Run Consequences of Living in a Poor Neighborhood," Berkeley Program on Housing and Urban Policy, Working Paper Series qt9np9p7m5, Berkeley Program on Housing and Urban Policy.
  7. Daniel S. Hamermesh & Gerard Pfann, 1992. "Turnover and the Dynamics of Labor Demand," NBER Working Papers 4204, National Bureau of Economic Research, Inc.
  8. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  9. Marianne E. Page & Gary Solon, 2003. "Correlations between Brothers and Neighboring Boys in Their Adult Earnings: The Importance of Being Urban," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 831-856, October.
  10. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  11. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May.
  12. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  13. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  14. Robert Haveman & Barbara Wolfe, 1995. "The Determinants of Children's Attainments: A Review of Methods and Findings," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1829-1878, December.
  15. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  16. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-88, January.
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