Understanding How Economic Crises Shape Social Mobility

Do economic crises improve or diminish intergenerational mobility?

Large economic crisis are often catalyzed by shocks to the financial system and represent common features of the global economy with immense consequences for society.

Recent studies have shown that workers more exposed to these events experience substantial persistent drops in earnings and employment compared to less exposed workers.

However, theory suggests that these shocks may have implications that extend even beyond the current generation, and that the sign of the effects on the stake of the lottery of birth are unclear. Despite these predictions we lack empirical evidence.

The main reason is difficulties in accessing appropriate data that not only link parents and children’s outcomes, but also contain some measure of crisis exposure that allows researchers to construct a control group to approximate the counterfactual outcome had the crisis never happened.

The main goal of this research program is to study the effects on intergenerational mobility of the massive financial crisis that hit Sweden in 1990/91-93 and coincided with a five-fold increase in aggregate unemployment.

The crisis ranks among the five most severe financial crises in history and satisfies all features typically associated with financial crisis.

We use novel data and methods to investigate the effect of economic crisis on intergenerational mobility and the potential underlying mechanisms.