Employment prospects across generations and the intergenerational persistence of earnings

Abstract We study how the correlation of employment across generations affects the intergenerational persistence of earnings in a simple model of labor market transitions and human capital accumulation. Using data from the United Kingdom, we first document that individuals whose father is employed have an 8 percentage points higher probability of being employed, driven by a 50 percent higher job‐finding probability. We do not find similar patterns for job‐separation probabilities. Calibrating our model to match these patterns, we find that the estimated job‐finding probability differentials can account for up to 9 percent of the intergenerational persistence of earnings.