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The Intergenerational Effects of Worker Displacement

This article uses variation induced by firm closures to explore the intergenerational effects of worker displacement using a Canadian panel of administrative data that follows more than 39,000 father‐son pairs from 1978 to 1999. We find that children whose fathers were displaced have annual earnings about 9% lower than similar children whose fathers did not experience an employment shock. They are also more likely to receive unemployment insurance and social assistance. The estimates are driven by the experiences of children whose family income was at the bottom of the income distribution.