The literature on the intergenerational effects of unemployment has
shown that unemployment has short-term negative effects on children’s
schooling ambitions, performance and high school dropout rates. The
long-term effects on children’s educational outcomes, however, are
mixed. One potentially important limitation of previous studies has been
that they have ignored the heterogeneous effects of parental
unemployment on children’s education. We study the effects of parental
unemployment on children’s grade point average, enrollment into general
secondary and tertiary education by comparing the effects according to
the children’s age of exposure and the parental level of education. We
use high quality Finnish longitudinal register data and sibling
fixed-effect models to obtain causal effects. We find that parental
unemployment has negative effects on both children’s educational
enrollment and performance at the educational transitional periods when
children are an adolescent but parental unemployment is not detrimental
in early childhood. For general secondary but not for tertiary
enrollment, children’s poorer school performance due to parental
unemployment explains the effect entirely. Parental unemployment is not
affecting children general secondary enrollment or school performance
among higher educated parents. However, children with a higher educated
parent exposed to unemployment are less likely to enroll in tertiary
education. The reduced amount of parental economic resources due to
unemployment cannot explain any of these effects. This calls for other
forms of support for children at crucial periods when educational
decisions are made.