Do large economic shocks increase intergenerational earnings mobility by creating new economic opportunities, or do they instead reduce mobility by reinforcing the links between generations? To answer this question, we estimate how the Norwegian oil boom starting in the 1970s affected intergenerational mobility in local labor markets that were most affected by the growing oil industry. We find that this resource shock increased intergenerational mobility for cohorts starting their professional career in the beginning of the oil boom. These findings are not driven by pre-existing local-level differences in intergenerational mobility and persist for cohorts entering the labor market a decade into the oil boom. The change in intergenerational mobility is mostly driven by upward mobility and an increase of lower earnings in oil boom affected local labor markets. Neither geographic differences in human capital investment nor an increase in returns to education are the key mechanisms explaining our results. These geographic differences in intergenerational mobility do, however, not persist for the third generation.
Co-authors:
Aline Bütikofer (Norwegian School of Economics)
Antonio Dalla-Zuanna (Norwegian School of Economics)