Francesco Agostinelli
Domenico Ferraro
Xincheng Qiu
Giuseppe Sorrenti

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.

Publication Type
Working Paper
File Description
First version, January 2024
JEL Codes
D10: Household Behavior: General
J13: Fertility; Family Planning; Child Care; Children; Youth
J22: Time Allocation and Labor Supply
wage risk
household labor supply
Child Development
social insurance