Income Insecurity and Youth Emancipation: A Theoretical Approach
AbstractIn this paper, we propose a theoretical model to study the effect of income insecurity of parents and offspring on the child's residential choice. Parents are partially altruistic toward their children and will provide financial help to an independent child when her income is low relative to the parents'. We find that children of more altruistic parents are more likely to become independent. However, first-order stochastic dominance (FOSD) shifts in the distribution of the child's future income (or her parents') have ambiguous effects on the child's residential choice. Parental altruism is the very source of ambiguity in the results. If parents are selfish or the joint income distribution of parents and child places no mass on the region where transfers are provided, a FOSD shift in the distribution of the child's (parents') future income will reduce (raise) the child's current income threshold for independence.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 8 (2008)
Issue (Month): 1 (July)
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Web page: http://www.degruyter.com
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- Mendez, Ildefonso, 2008. "The Role of Partnership Status and Expectations on the Emancipation Behaviour of Spanish Graduates," MPRA Paper 8655, University Library of Munich, Germany.
- Ildefonso Méndez & Francisco Maeso, 2008. "The Role Of Partnership Status And Expectations On The Emancipation Behaviour Of Spanish Graduates," Working Papers wp2008_0812, CEMFI.
- Mario García-Ferreira & Ernesto Villanueva, 2007. "Employment risk and household formation: evidence from differences in firing costs," Banco de Espaï¿½a Working Papers 0737, Banco de Espa�a.
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