This paper studies the mechanisms and the extent to which parental wage risk passes through to children's skill development. Through a quantitative dynamic labor supply model in which two parents choose whether to work short or long hours or not work...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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This paper studies the mechanisms and the extent to which parental wage risk passes through to children's skill development. Through a quantitative dynamic labor supply model in which two parents choose whether to work short or long hours or not work at all, time spent with children, and child-related expenditures, we find that income risk impacts skill accumulation, permanently lowering children's skill levels. To the extent that making up for cognitive skill losses during childhood is hard-as available evidence suggests-uninsurable income risk can negatively impact the labor market prospects of future generations.