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

Rob Alessie (), Agar Brugiavini () and Guglielmo Weber ()

No 11079, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E2 D1 D9 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mic
Date: 2005-01
Note: EFG
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Published as Rob Alessie, Agar Brugiavini, Guglielmo Weber. "Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands," in Richard H. Clarida, Jeffrey Frankel, Francesco Giavazzi and Kenneth D. West, editors, "NBER International Seminar on Macroeconomics 2004" The MIT Press (2006)

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Chapter: Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands (2006)
Working Paper: Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands (2004)
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