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

In: NBER International Seminar on Macroeconomics 2004

Author

Listed:
  • 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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Suggested Citation

  • Rob Alessie & Agar Brugiavini & Guglielmo Weber, 2006. "Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands," NBER Chapters,in: NBER International Seminar on Macroeconomics 2004, pages 413-457 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:0083
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    References listed on IDEAS

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    1. Erich Battistin & Raffaele Miniaci & Guglielmo Weber, 2003. "What Do We Learn from Recall Consumption Data?," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
    2. 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).
    3. 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 315-339, May.
    4. 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.
    5. Browning, Martin, 2000. " The Saving Behaviour of a Two-Person Household," Scandinavian Journal of Economics, Wiley Blackwell, pages 235-251.
    6. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, pages 857-875.
    7. Brugiavini, Agar & Padula, Mario, 2001. "Too much for retirement? Saving in Italy," Research in Economics, Elsevier, pages 39-60.
    8. 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.
    9. Orazio Attanasio, 1993. "A cohort analysis of saving behaviour by US households," IFS Working Papers W93/04, Institute for Fiscal Studies.
    10. 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, June.
    11. Alessie, Rob & Kapteyn, Arie, 2001. "Savings and pensions in The Netherlands," Research in Economics, Elsevier, pages 61-82.
    12. Maurizio Mazzocco, 2004. "Saving, Risk Sharing, and Preferences for Risk," American Economic Review, American Economic Association, pages 1169-1182.
    13. 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.
    14. Alessie, Rob & Kapteyn, Arie, 2001. "Savings and pensions in The Netherlands," Research in Economics, Elsevier, pages 61-82.
    15. Browning, Martin, 2000. " The Saving Behaviour of a Two-Person Household," Scandinavian Journal of Economics, Wiley Blackwell, pages 235-251.
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    Citations

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    Cited by:

    1. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, pages 1432-1467.
    2. Sara Ayllón, 2009. "Modelling state dependence and feedback effects between poverty, employment and parental home emancipation among European youth," Working Papers 10, Government Institute for Economic Research Finland (VATT).
    3. Nuno Martins & Ernesto Villanueva, 2006. "Does limited access to mortgage debt explain why young adults live with their parents?," Working Papers 0628, Banco de España;Working Papers Homepage.
    4. 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, pages 2209-2226.
    5. Sascha Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2010. "Youth emancipation and perceived job insecurity of parents and children," Journal of Population Economics, Springer;European Society for Population Economics, pages 1047-1071.
    6. Deborah A. Cobb-Clark, 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, pages 160-176.
    7. 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, pages 2209-2226.

    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D1 - Microeconomics - - Household Behavior
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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