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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.

Suggested Citation

  • Rob Alessie & Agar Brugiavini & Guglielmo Weber, 2005. "Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands," NBER Working Papers 11079, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11079
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    Cited by:

    1. Ayllón, Sara, 2009. "Modelling state dependence and feedback effects between poverty, employment and parental home emancipation among European youth," Working Papers 10, VATT Institute for Economic Research.
    2. Fernanda Mazzotta & Lavinia Parisi, 2015. "The effect of Employment on Leaving Home in Italy," Discussion Papers 8_2015, CRISEI, University of Naples "Parthenope", Italy.
    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.
    4. 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.
    5. Viola Angelini & Anne Laferrère, 2013. "Parental altruism and nest leaving in Europe: evidence from a retrospective survey," Review of Economics of the Household, Springer, vol. 11(3), pages 393-420, September.
    6. Arnstein Aassve & Bruno Arpino & Francesco C Billari, 2013. "Age Norms on Leaving Home: Multilevel Evidence from the European Social Survey," Environment and Planning A, , vol. 45(2), pages 383-401, February.
    7. Cobb-Clark, Deborah A., 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," IZA Discussion Papers 3309, Institute of Labor Economics (IZA).
    8. 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.
    9. 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 2209-2226, December.
    10. Olga Cantó & Inmaculada Cebrián & Gloria Moreno, 2019. "Household precariousness and youth living arrangements in Spain: evidence for a complete business cycle," Working Papers 499, ECINEQ, Society for the Study of Economic Inequality.
    11. Luca Stella, 2014. "Living Arrangements in Europe: Whether and Why Paternal Retirement Matters," "Marco Fanno" Working Papers 0177, Dipartimento di Scienze Economiche "Marco Fanno".
    12. 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.

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    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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