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Parental Proximity and Earnings after Job Displacements

System Working Paper 17-32 | Published December 27, 2017

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Authors

Patrick Coate National Council for Compensation Insurance

Pawel Krolikowski Federal Reserve Bank of Cleveland

Mike Zabek University of Michigan

Parental Proximity and Earnings after Job Displacements

Abstract

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.