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Moving Back Home: Insurance against Labor Market Risk

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  • Greg Kaplan

Abstract

This paper demonstrates that the option to move in and out of the parental home is a valuable insurance channel against labor market risk, which facilitates the pursuit of jobs with the potential for high earnings growth. Using monthly panel data, I document an empirical relationship among coresidence, individual labor market events, and subsequent earnings growth. I estimate the parameters of a dynamic game between youths and parents to show that the option to live at home can account for features of aggregate data for low-skilled young workers: small consumption responses to shocks, high labor elasticities, and low savings rates.

Suggested Citation

  • Greg Kaplan, 2012. "Moving Back Home: Insurance against Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 120(3), pages 446-512.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/666588
    DOI: 10.1086/666588
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