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

71 Pages Posted: 4 Sep 2015

See all articles by Andrey Fradkin

Andrey Fradkin

Boston University - Questrom School of Business

Frédéric Panier

McKinsey & Co. Inc.

Ilan Tojerow

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); IZA Institute of Labor Economics

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: labor supply, unemployment insurance, first-time job seekers, job quality, family insurance

JEL Classification: J13, J22, J64, J65

Suggested Citation

Fradkin, Andrey and Panier, Frédéric and Tojerow, Ilan, Blame the Parents? How Financial Incentives Affect Labor Supply and Job Quality for Young Adults. IZA Discussion Paper No. 9304, Available at SSRN: https://ssrn.com/abstract=2655344 or http://dx.doi.org/10.2139/ssrn.2655344

Andrey Fradkin

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

HOME PAGE: http://www.andreyfradkin.com

Frédéric Panier

McKinsey & Co. Inc.

Konigsallee 60C
Chicago, IL Quebec 60603
United States

Ilan Tojerow (Contact Author)

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium

HOME PAGE: http://homepages.ulb.ac.be/~itojerow/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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