Intergenerational correlation of labour market outcomes

• Guyonne Kalb, Nicolas Herault
• Melbourne Institute of Applied Economic and Social Research

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29 June 2009This paper focuses on the correlation of labour market outcomes of parents and children and investigates whether education is an important factor in this correlation, allowing for its potential endogeneity.

Based on the Household, Income and Labour Dynamics in Australia (HILDA) data, the multivariate analyses show that men’s labour market outcomes are affected by their fathers’ labour market outcomes. The results show no significant intergenerational correlation of labour market outcomes for women when using the proportion of time in unemployment. However, there is a significant relationship between the labour market outcomes of the mother and the proportion of time spent out of work by her daughter.

Finally, the results show a significant relationship between parents’ and children’s education levels, indicating that there is an indirect effect of parental education on their children’s labour market outcomes through education. Indeed, it is shown that education significantly reduces the proportion of time in unemployment and not in work.