Short-run Effects of Parental Job Loss on Children's Academic Achievement

We study the relationship between parental job loss and children's academic achievement using data on job loss and grade retention from the 1996, 2001, and 2004 panels of the Survey of Income and Program Participation. We find that a parental job loss increases the probability of children's grade retention by 0.8 percentage points, or around 15 percent. After conditioning on child fixed effects, there is no evidence of significantly increased grade retention prior to the job loss, suggesting a causal link between the parental employment shock and children's academic difficulties. These effects are concentrated among children whose parents have a high school education or less.