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Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands

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  • Rob Alessie
  • Agar Brugiavini
  • Guglielmo Weber

Abstract

The paper deals with the e.ects of cohabitation of grown children with their parents on household saving, using data from Italy and the Netherlands. It presents a two-period gametheoretical model where the child has to decide whether to move out of the parental home. This decision is affected by transaction costs, the child's preference for independence, and by the consumption loss induced by the move (consumption is a public good while the child lives in the parental home). We show that the child's income share affects the household saving decision, in contrast with predictions of the standard unitary model of household decision making. Empirical results from both countries are supportive of the key model predictions. We find strong positive effects of the child income share on the saving rate in Italy, where we calculate saving as the difference between disposable income and consumption but cannot distinguish children who will leave from those who will stay. We also find some significant effects of the child income share on household saving rate in the Netherlands, where saving is computed as the change over time in financial wealth. In the Dutch data we distinguish between children who stay and children who leave. The effect of the child's income share is significantly negative for those who stay, positive for those who leave.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11079.

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Date of creation: Jan 2005
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Publication status: published as Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands , Rob Alessie, Agar Brugiavini, Guglielmo Weber. in NBER International Seminar on Macroeconomics 2004 , Clarida, Frankel, Giavazzi, and West. 2006
Handle: RePEc:nbr:nberwo:11079

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  1. Alessie, Rob & Kapteyn, Arie, 2002. "Savings and pensions in the Netherlands," Serie Research Memoranda 0009, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Marco Manacorda & Enrico Moretti, 2006. "Why do Most Italian Youths Live with Their Parents? Intergenerational Transfers and Household Structure," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 800-829, 06.
  3. Brugiavini, Agar & Padula, Mario, 2001. "Too much for retirement? Saving in Italy," Research in Economics, Elsevier, vol. 55(1), pages 39-60, March.
  4. Francesco C. Billari & Dimiter Philipov & Pau Baizán Munoz, 2001. "Leaving home in Europe: the experience of cohorts born around 1960," MPIDR Working Papers WP-2001-014, Max Planck Institute for Demographic Research, Rostock, Germany.
  5. Maria Concetta Chiuri & Tullio Jappelli, 2000. "Financial Market Imperfections and Home Ownership: A Comparative Study," CSEF Working Papers 44, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2000.
  6. Erich Battistin & Raffale Miniaci & Guglielmo Weber, 2000. "What do we learn from recall consumption data?," IFS Working Papers W00/10, Institute for Fiscal Studies.
  7. Guiso, Luigi & Jappelli, Tullio, 2002. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 315-39, May.
  8. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2004. "Job Insecurity and Children’s Emancipation," IZA Discussion Papers 1046, Institute for the Study of Labor (IZA).
  9. Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Discussion Papers 96-09, University of Copenhagen. Department of Economics, revised Jan 1996.
  10. Orazio P. Attanasio, 1998. "Cohort Analysis of Saving Behavior by U.S. Households," Journal of Human Resources, University of Wisconsin Press, vol. 33(3), pages 575-609.
  11. Orazio Attanasio, 1993. "A cohort analysis of saving behaviour by US households," IFS Working Papers W93/04, Institute for Fiscal Studies.
  12. Alessie, Rob & Lusardi, Annamaria & Aldershof, Trea, 1997. "Income and Wealth over the Life Cycle: Evidence from Panel Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(1), pages 1-32, March.
  13. Maurizio Mazzocco, 2004. "Saving, Risk Sharing, and Preferences for Risk," American Economic Review, American Economic Association, vol. 94(4), pages 1169-1182, September.
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Cited by:
  1. Cobb-Clark, Deborah A., 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," IZA Discussion Papers 3309, Institute for the Study of Labor (IZA).
  2. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2005. "Youth Emancipation and Perceived Job Insecurity of Parents and Children," CEPR Discussion Papers 5338, C.E.P.R. Discussion Papers.
  3. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-26, December.
  4. Sara Ayllón, 2009. "Modelling State Dependence and Feedback Effects between Poverty, Employment and Parental Home Emancipation among European Youth," SOEPpapers on Multidisciplinary Panel Data Research 235, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Nuno Martins & Ernesto Villanueva, 2006. "Does limited access to mortgage debt explain why young adults live with their parents?," Banco de Espa�a Working Papers 0628, Banco de Espa�a.
  6. Francesco C. Billari & Guido Tabellini, 2010. "Italians Are Late: Does It Matter?," NBER Chapters, in: Demography and the Economy, pages 371-412 National Bureau of Economic Research, Inc.
  7. Sara Ayllón, 2009. "Poverty and living arrangements among youth in Spain, 1980-2005," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(17), pages 403-434, April.

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