Presenters: Fabrizio Bernardi (EUI), Diederik Boertien (EUI), Koen Geven (EUI)

When: Tuesday, 13 October 2015, 13h00-14h30

Where: Seminar Room 2, Badia Fiesolana

Abstract: In this paper, we study the association between parental separation and wealth accumulation of their offspring, a topic that has so far been understudied. Data from the NLSY79 (N = 3930) reveal that children of separated parents face a substantial wealth penalty at age 47-55 averaging around $100.000. This result is robust to the inclusion of an extensive list of controls for parental background characteristics and propensity score matching methods. We investigate three main paths through which parental separation can influence offspring wealth, namely, (1) own wealth accumulation through cognitive and non-cognitive skills formation, (2) offspring family dynamics such as divorce, and (3) intergenerational transfers. Our mediation analyses find skill formation and own family dynamics to be the primary channels explaining the wealth penalty. We argue that many small to moderate penalties of parental separation on different aspects of life together sum up to a large penalty in wealth accumulation.