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

  • Rob Alessie
  • Agar Brugiavini
  • Guglielmo Weber

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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File URL: http://www.nber.org/papers/w11079.pdf
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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
Note: EFG
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  1. 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.
  2. Sascha O. Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2004. "Job Insecurity and Children's Emancipation," CESifo Working Paper Series 1144, CESifo Group Munich.
  3. Guiso, Luigi & Jappelli, Tullio, 1998. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," CEPR Discussion Papers 2050, C.E.P.R. Discussion Papers.
  4. Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Department of Economics Working Papers 1994-01, McMaster University.
  5. 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.
  6. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
  7. 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).
  8. 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.
  9. Orazio Attanasio, 1993. "A cohort analysis of saving behaviour by US households," IFS Working Papers W93/04, Institute for Fiscal Studies.
  10. Brugiavini, Agar & Padula, Mario, 2001. "Too much for retirement? Saving in Italy," Research in Economics, Elsevier, vol. 55(1), pages 39-60, March.
  11. Alessie, Rob & Kapteyn, Arie, 2001. "Savings and pensions in The Netherlands," Research in Economics, Elsevier, vol. 55(1), pages 61-82, March.
  12. 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.
  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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