Family matters : Essays in Applied Microeconomics

Abstract: This thesis consists of four self-contained papers in applied microeconomics with family as a common theme. The first paper documents how the financial portfolios of parents change in response to the birth of a child. To identify dynamic effects around child birth, we use an event study approach with a matched treatment and control sample and a novel implementation of the same sex instrument. We find that parents reduce their financial risk by a reduced propensity to participate in risky financial markets. Our findings are consistent with a consumption smoothing response as effects seem to be driven by a need for liquidity caused by lower earnings and increased consumption and housing costs. We find little evidence suggesting that parents actively adjust the composition of their risky financial portfolio in response to child birth.The second paper examines an understudied determinant of the transmission of wealth across generations; fertility. We use rich micro-level data from Swedish registers to show that intergenerational wealth persistence is decreasing in family size, even before any inheritance has taken place. Using twins as a source of exogenous variation in family size, we find support for a causal interpretation of the observed pattern. Our results are consistent with a simple dilution mechanism which is more distinguished for wealth than income. We also examine the behavioral response to fertility, separately for parents and children. While parents’ position in their net wealth distribution is unaffected by the number of children they have, children who experience an exogenous increase in number of siblings are accumulating less wealth and thus seem unable to compensate for the fact that they must share parental wealth with many siblings. The third paper assesses whether current policy measures aimed at achieving gender equality in the parental generation have important impacts on gendered outcomes of the next generation. We evaluate the Swedish 'daddy month' reform, which earmarked one month of parental leave for fathers. As our main outcome of interest, we consider children’s choice of mathematically intense fields of study in upper secondary school. We use a regression discontinuity difference-in-difference design for identification, exploiting that the reform was implemented based on date of birth. We find that girls are more likely to choose a high math intensity program in upper secondary school due to the reform, but this is only precisely estimated for a subgroup of families where the relative effect of the reform on paternity leave take-up is large.The fourth paper examines how the gender of a sibling affects labor market outcomes and family formation. Parental preferences for child gender is a confounding factor but we employ two empirical strategies that both address this problem. First, we use a large sample of singletons to estimate whether first-borns are affected by the gender of their second-born sibling. Second, we look at a sample of dizygotic (i.e. non-identical) twins. We find that a same-sex sibling increases men’s earnings and family formation outcomes (marriage and fertility), as compared to an opposite-sex sibling. The results for women are similar but the effects are smaller in magnitude and less robust. We find suggestive evidence that the income premium can be driven by competition between brothers and shared job search networks for sisters. The effects on family formation might stem from differential parental treatment for men, and from competition between sisters for women.

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