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Title: Family income shocks and adolescent human capital Authors:  Emma Tominey - University of York (United Kingdom) [presenting]
Pedro Carneiro - University College London (United Kingdom)
Kjell Salvanes - NHH (Norway)
Abstract: How do shocks to parental income drive adolescent human capital, including years ofschooling, high school dropout, university attendance, IQ and health? A structural model decomposes household shocks into permanent and transitory components, then the effect of shocks at age 1-16 is estimated for 600,000 Norwegian children. The effect of permanent shocks declines - and of transitory shocks is small and constant across child age, suggesting parents optimise similarly to consumption. We explore possible insurance mechanisms available to households and find direct evidence of spousal income and indirect evidence of government transfers partially smoothing the effect of income shocks on child human capital.