Parental Job Loss and Children's Long-Term Outcomes: Evidence from 7 Million Fathers' Layoffs

How do parental layoffs and their large attendant income losses affect children's long-term outcomes? This question has proven difficult to answer due to the endogeneity of parental layoffs. I overcome this problem by exploiting the timing of 7 million fathers' layoffs when children are age 12-29 in administrative data for the United States. Layoffs dramatically reduce family income but only slightly reduce college enrollment, college quality, and early career earnings. These effects are consistent with a weak estimated propensity to spend on college out of marginal parental income. I find that larger effects based on firm closures stem from selection.