Income insecurity and youth emancipation: a theoretical approach

Ana Fernandes, Sascha O. Becker, Samuel Bentolila, Andrea Ichino

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3 Citations (Scopus)

Abstract

In this paper, we propose a theoretical model to study the effect of income insecurity of parents and offspring on the child's residential choice. Parents are partially altruistic toward their children and will provide financial help to an independent child when her income is low relative to the parents'. We find that children of more altruistic parents are more likely to become independent. However, first-order stochastic dominance (FOSD) shifts in the distribution of the child's future income (or her parents') have ambiguous effects on the child's residential choice. Parental altruism is the very source of ambiguity in the results. If parents are selfish or the joint income distribution of parents and child places no mass on the region where transfers are provided, a FOSD shift in the distribution of the child's (parents') future income will reduce (raise) the child's current income threshold for independence.

Original languageEnglish
Article number19
Number of pages41
JournalBE Journal of Economic Analysis and Policy
Volume8
Issue number1
DOIs
Publication statusPublished - 2008
Externally publishedYes

Keywords

  • Coresidence
  • Emancipation
  • Income insecurity
  • Option value
  • Partial altruism
  • Stochastic dominance

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