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Job Insecurity and Youth Emancipation: A Theoretical Approach

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  • Becker, Sascha O.
  • Bentolila, Samuel
  • Fernandes, Ana
  • Ichino, Andrea

Abstract

In this paper, we propose a theoretical model to study the effect of income insecurity of parents and offspring on the child's residential choice. Parents are partially altruistic toward their children and will provide financial help to an independent child when her income is low relative to the parents'. We show that first-order stochastic dominance (FOSD) shifts in the distribution of the child's future income (or her parents') will have ambiguous effects on the child’s residential choice. The analysis identifies altruism as the source of ambiguity in the results. If parents are selfish or the joint income distribution of parents and child places no mass on the region where transfers are provided, a FOSD shift in the distribution of the child’s (parents’) future income will reduce (raise) the child’s current income threshold for independence.

Suggested Citation

  • Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2005. "Job Insecurity and Youth Emancipation: A Theoretical Approach," CEPR Discussion Papers 5339, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5339
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    References listed on IDEAS

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    1. Maite Martínez-Granado & Javier Ruiz-Castillo, 2002. "The decisions of Spanish youth: A cross-section study," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(2), pages 305-330.
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    3. McElroy, Marjorie B, 1985. "The Joint Determination of Household Membership and Market Work: The Case of Young Men," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 293-316, July.
    4. G. C. Giannelli & C. Monfardini, 2000. "Joint Decisions on Household Membership and Human Capital Accumulation of Youths: The role of expected carnings and labour market rationing," Working Papers 375, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, "undated". "The Effects of Income and Wealth on Time and MOney Transfers Between Parents and Children," IPR working papers 96-5, Institute for Policy Resarch at Northwestern University.
    6. 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, vol. 23(3), pages 1047-1071, June.
    7. Antonia Díaz & M. Dolores Guilló, 2005. "Family ties and labor supply," Investigaciones Economicas, Fundación SEPI, vol. 29(2), pages 289-329, May.
    8. 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.
    9. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-253, April.
    10. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Intergenerational Support and the Life-Cycle Incomes of Young Men and Their Parents: Human Capital Investments, Coresidence, and Intergenerational Financial Transfers," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 84-112, January.
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    Cited by:

    1. 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, vol. 23(3), pages 1047-1071, June.
    2. Mendez, Ildefonso, 2008. "The Role of Partnership Status and Expectations on the Emancipation Behaviour of Spanish Graduates," MPRA Paper 8655, University Library of Munich, Germany.
    3. Deborah A. Cobb-Clark & David C. Ribar, 2009. "Financial Stress, Family Conflict, and Youths’ Successful Transition to Adult Roles," CEPR Discussion Papers 627, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    4. Mario García-Ferreira & Ernesto Villanueva, 2007. "Employment risk and household formation: evidence from differences in firing costs," Working Papers 0737, Banco de España;Working Papers Homepage.
    5. 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, vol. 41(2), pages 160-176, June.

    More about this item

    Keywords

    emancipation; job security; option value;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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