System Working Paper 17-32

Parental Proximity and Earnings after Job Displacements

Patrick Coate | National Council for Compensation Insurance
Pawel Krolikowski | Federal Reserve Bank of Cleveland
Mike Zabek | University of Michigan

Published December 27, 2017

Young adults, ages 25 to 35, who live in the same neighborhoods as their parents experience stronger earnings recoveries after a job displacement than those who live farther away. This result is driven by smaller on-impact wage reductions and sharper recoveries in both hours and wages. We show that geographic mobility, different job search durations, housing transfers, and ex-ante differences between individuals are unlikely explanations. Our findings are consistent with a framework in which some individuals living near their parents face a better wage-offer distribution, though we find no direct evidence of parental network effects.

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