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The Intergenerational Transmission of Employers and the Earnings of Young Workers

Lunch-Seminar CIREQ-McGill
joint with the Department of Economics, McGill University

Leacock 429 (McGill University, 855, rue Sherbrooke Ouest)

Abstract: To what extent do connections in the labor market shape intergenerational mobility? I use employer-employee linked data to study one important type of connection: jobs obtained at a parent’s employer. 29 percent of individuals work for a parent’s employer at least once by age 30. Exploiting transitory and idiosyncratic variation in the availability of jobs at the parent’s employer, I estimate that working for a parent’s employer increases initial earnings by 19 percent. The results are attributable to parents using their connections to provide access to higher-paying firms. Individuals with higher-earning parents are more likely to work for a parent’s employer and experience larger earnings gains when they do. Consequently, the elasticity of initial earnings with respect to parental earnings would be 7.2 percent lower if no one found a job through these connections. The findings raise the possibility that connections to firms through one’s social network could be an important determinant of intergenerational mobility.

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