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Moving Back Home: Insurance against Labor Market Risk

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://dx.doi.org/10.1086/666588
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File URL: http://dx.doi.org/10.1086/666588
Download Restriction: Access to the online full text or PDF requires a subscription.

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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
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. David Card & Thomas Lemieux, 1997. "Adapting to Circumstances: The Evolution of Work, School, and Living Arrangements Among North American Youth," NBER Working Papers 6142, National Bureau of Economic Research, Inc.
  2. Daniel Barczyk & Matthias Kredler, 2014. "Altruistically motivated transfers under uncertainty," Quantitative Economics, Econometric Society, vol. 5(3), pages 705-749, November.
  3. Neil Bruce & Michael Waldman, 1990. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 155-165.
  4. David Card & Thomas Lemieux, 1997. "Adapting to Circumstances: The Evolution of Work, School, and Living Arrangements Among North American Youth," Working Papers 765, Princeton University, Department of Economics, Industrial Relations Section..
  5. Ermisch, John & Di Salvo, Pamela, 1997. "The Economic Determinants of Young People's Household Formation," Economica, London School of Economics and Political Science, vol. 64(256), pages 627-44, November.
  6. Dora L. Costa, 1999. "A House of Her Own: Old Age Assistance and the Living Arrangements of Older Nonmarried Women," NBER Working Papers 6217, National Bureau of Economic Research, Inc.
  7. Sebastian Dyrda & Greg Kaplan & José-Víctor Ríos-Rull, 2012. "Business Cycles and Household Formation: The Micro vs the Macro Labor Elasticity," NBER Working Papers 17880, National Bureau of Economic Research, Inc.
  8. Nir Jaimovich & Henry E. Siu, 2007. "The Young, the Old, and the Restless: Demographics and Business Cycle Volatility," Discussion Papers 07-010, Stanford Institute for Economic Policy Research.
  9. repec:fth:prinin:386 is not listed on IDEAS
  10. repec:pri:indrel:386 is not listed on IDEAS
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  1. Moving Back Home: Insurance against Labor Market Risk (JPE 2012) in ReplicationWiki
  2. Economic Logic blog

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