Does Intelligence Shield Children From the Effects of Parental Unemployment?

Abstract

The negative effect of parental job loss on various outcomes of children is well-documented. In this paper, I provide new evidence on how these effects change with the intelligence of children. I find that higher intelligence mitigates some of the impacts, but not all. Parental unemployment is more harmful to the education of children at the top of the distribution. This forces them to start their careers at lower-paying jobs and continues to weigh down on their wages even later in life. Nevertheless, higher intelligence alleviates the effect on labour supply, job ranking and monthly earnings over time. These results are consistent with the loss of income and human capital investments as a leading channel through which parental unemployment affects children's outcomes.

Keywords: parental unemployment, intelligence, education, earnings

JEL Classification: I21, J62