This paper uses variation induced by firm closures to explore the intergenerational effects of worker displacement. Using a Canadian panel of administrative data that follows almost 60,000 father-child pairs from 1978 to 1999 and includes detailed information about the firms at which the father worked, we construct narrow treatment and control groups whose fathers had the same level of permanent income prior to 1982 when some of the fathers were displaced. We demonstrate that job loss leads to large permanent reductions in family income and small increases in mobility and divorce. Comparing outcomes among individuals whose fathers experienced an employment shock to outcomes among individuals whose fathers did not, we find that children whose fathers were displaced have annual earnings about 9% lower than similar children whose fathers did not experience an employment shock. They are also more likely to receive unemployment insurance and social assistance. The estimates are driven by the experiences of children whose family income was at the bottom of the income distribution, and are robust to a number of specification checks. This work was completed while Oreopoulos was a Statistics Canada Research Fellow and member of the Family and Labour Studies Division of Statistics Canada. The financial support of the National Science Foundation is gratefully acknowledged. We also wish to thank Miles Corak, and seminar participants at Brown University, MIT, Princeton University, Stanford University, Yale University, the University of California Berkeley, UCLA, the University of Toronto and the NBER summer institute for their helpful comments.

The United States and Canada are as close economically and socially as any pair of countries in the world. They share similar cultural traditions and economic institutions. They are also closely linked by trade and multinational firms that operate on both sides of the border. Nevertheless, the two countries differ inmany small but important ways that ultimately affect individual outcomes and overall labor market performance. Canada has a more comprehensive set of social programs that tend to be more redistributive than those in the United States. Canada also has a higher rate of immigration, with nearly twice as many immigrants per capita. The Canadian economy is more reliant on the natural resource sector, while the United States has a larger tech sector. The United States has a wider distribution of income, with higher poverty rates and a higher share of people with earnings far above themedian salary. It also experienced a far deeper and longer-lasting recession in 2007–8, the consequences of which are still being analyzed and debated. There is a long tradition in social science of using comparisons between the United States and Canada to uncover the impacts of different institutions and policies, including work in political science (e.g., Lipset 1990), criminology (e.g., Sloan et al. 1988), medicine (e.g., Gorey et al. 2009), demography (e.g., Boyd 1976), and labor relations (e.g., Meltz 1985). Building on this tra-

This article attempts to improve our understanding of the causal processes that contribute to intergenerational immobility by exploiting historical changes in compulsory schooling laws that affected the educational attainment of parents without affecting their innate abilities or endowments. We examine the influence of parental compulsory schooling on children’s grade‐for‐age using the 1960, 1970, and 1980 U.S. censuses. Our estimates indicate that a 1‐year increase in the education of either parent reduces the probability that a child repeats a grade by between 2 and 4 percentage points.