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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.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/666588
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File URL: http://www.jstor.org/stable/full/10.1086/666588
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 120 (2012)
Issue (Month): 3 ()
Pages: 446 - 512

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Handle: RePEc:ucp:jpolec:doi:10.1086/666588

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Web page: http://www.journals.uchicago.edu/JPE/

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Moving back home- Determining the household size!
    by paragwaknis in Musings of the Sorts on 2013-05-07 04:50:57
  2. The parental home as unemployment insurance
    by Economic Logician in Economic Logic on 2010-05-17 14:47:00
  3. Parents as Unemployment Insurance
    by Mark Thoma in Economist's View on 2010-05-18 07:15:00
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