Hannu Lehti, Jani Erola & Aleksi Karhula
Literature on the effects of parental unemployment on children’s attainment has shown convincingly that parental unemployment has short-term negative effects on children. However, the long-term effects on children’s attainment are more mixed. One potentially important limitation of previous studies has been that they have ignored the heterogeneous effects of parental unemployment. We study parental unemployment and children’s enrollment in higher education by comparing the effects according to the children’s age of exposure (0–18) and the parental level of education (basic, secondary and tertiary). The topic is analyzed using Finnish register data on 23,328 children in 10,609 families by employing sibling fixed-effect models. Our results suggest that parental unemployment has negative effects on children’s educational achievement and that the effect is more detrimental just before educational transitions at ages 14–15 and 18. The effect of unemployment on children’s higher educational achievement is negative in families with secondary- and higher-educated parents but not among compulsory-educated parents. Higher-educated parents are not able to compensate for the negative effects of unemployment. Detailed analysis of the mechanisms suggests that the reduced amount of parental economic resources or cumulative disadvantages due to unemployment cannot explain the effects, but a child exposed to parental unemployment becomes more risk averse toward higher education.