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Moving Back Home: Insurance against Labor Market Risk

Greg Kaplan

Journal of Political Economy, 2012, vol. 120, issue 3, 446 - 512

Abstract: This paper demonstrates that the option to move in and out of the parental home is a valuable insurance channel against labor market risk, which facilitates the pursuit of jobs with the potential for high earnings growth. Using monthly panel data, I document an empirical relationship among coresidence, individual labor market events, and subsequent earnings growth. I estimate the parameters of a dynamic game between youths and parents to show that the option to live at home can account for features of aggregate data for low-skilled young workers: small consumption responses to shocks, high labor elasticities, and low savings rates.

Date: 2012
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Working Paper: Moving back home: insurance against labor market risk (2010) Downloads
Working Paper: Moving back home: insurance against labor market risk (2010) Downloads
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