The Long Goodbye: the Economic Effects of Early Parental Death

Early life events are crucial determinants of individual life trajectories and long- term outcomes. Parental death is one of the most traumatic one, with potential irreversible consequences on a child development and hence a large contributor to inequality in adulthood. Using Danish administrative data, we estimate that the accidental death of a parent when the offspring is younger than 28 years of age has substantial negative effects on permanent income, and in particular for sons. The timing of death is also important, with effects that are typically larger for earlier deaths, i.e., those occurring in the first 1,000 days of life or by age 6. On average, we find a fall of 6% on permanent income, larger for sons at 8%, and, in the case of maternal death between the ages of 2 and 6, the effect is up to 21% and up to 30% if both parents die. When examining the reasons behind these detrimental effects, we uncover evidence supporting a range of negative impacts on children’s human capital development, such as diminished educational attainments, increased mental health challenges, and a penalizing geographical mobility.