The ability to move in with a parent provides insurance against labour market risk by allowing workers to reduce housing costs following income loss. Using linked panel data from the Health and Retirement Study, I show that job separations significantly increase the likelihood of moving home, and that this relationship persists into middle age even after accounting for parental health and caregiving needs. Motivated by this evidence, I estimate a structural life-cycle model in which individuals insure against unemployment risk through savings or by exercising the option to co-reside in a directed search environment. Access to co-residence enables workers to search for higher-wage jobs at the cost of longer expected unemployment durations; removing this option shortens search by roughly 5 weeks but lowers earnings and consumption. For an ex ante individual, the welfare value of this insurance is equivalent to a 71 percent increase in unemployment insurance benefits and remains stable from ages 20 to 40. Among younger workers, low asset holdings constrain self-insurance and make co-residence an important means of maintaining consumption during unemployment; among older workers, the reduced number of remaining working years limits their ability to rebuild earnings following job loss, increasing the value of the option to move home.
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Using data from the Health and Retirement Study (1998–2018), I show that child incomes, parent incomes, and parent assets, together with additional observables, explain less than 20 percent of the variation in inter vivos financial transfers. This finding is inconsistent with standard models of homogeneous altruism, in which transfer variation is driven entirely by differences in parent and child incomes and assets. I develop a static model of heterogeneous parental altruism in which altruism follows a lognormal distribution. The model generates transfers across parent and child income distributions, including positive transfers to relatively high-income children, a feature absent from standard homogeneous-altruism models. These distributional implications are important for policy evaluation, as standard models may overstate familial support for low-income children while understating support for high-income children.
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From 2000 to 2020, rental costs increased 20 percent faster than average prices. Over the same period, co-residence between parents and their adult children rose by almost 40 percent among individuals from ages 20 through 40. This paper analyzes the effects of rising rents on labour market search behaviour in a model of optional parental co-residence. I show that rent increases consistent with the data account for approximately one third of the observed rise in co-residence. Higher rental costs lead consumers to search more selectively, targeting higher-wage jobs despite lower job-finding probabilities, which results in higher unemployment. In addition, rising rents impose the largest welfare costs on younger workers, whose limited savings make them less able to self-insure against higher housing expenses.
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