Literature on the effects of parental unemployment on children’s attainment has shown

convincingly that parental unemployment has short-term negative effects on children.

However, the long-term effects on children’s attainment are more mixed. One

potentially important limitation of previous studies has been that they have ignored the

heterogeneous effects of parental unemployment. We study parental unemployment and

children’s enrollment in higher education by comparing the effects according to the

children’s age of exposure (0–18) and the parental level of education (basic, secondary

and tertiary). The topic is analyzed using Finnish register data on 23,328 children in

10,609 families by employing sibling fixed-effect models. Our results suggest that

parental unemployment has negative effects on children’s educational achievement and

that the effect is more detrimental just before educational transitions at ages 14–15 and

18. The effect of unemployment on children’s higher educational achievement is

negative in families with secondary- and higher-educated parents but not among

compulsory-educated parents. Higher-educated parents are not able to compensate for

the negative effects of unemployment. Detailed analysis of the mechanisms suggests

that the reduced amount of parental economic resources or cumulative disadvantages

due to unemployment cannot explain the effects, but a child exposed to parental

unemployment becomes more risk averse toward higher education.