Leaving the nest: the interaction of parental income and family environment

Abstract

The influence of parental income on the choice of young adults to leave the parents'home is still an open question. This paper suggests a model in which either moreparental income increases the independent child's consumption and encourages leaving(standard altruism) or increases more his consumption when co-residing (proximityaltruism) and induces to stay. Besides, housing is a non-transferable good, and lesshousing consumption at the parents' induces to move out. Empirical tests on French datadoes not reject the model. Both poor and rich parents are more likely to see theirchildren go than middle class parents, and the quality of the nest matters. Lack of space, living in a small town encourage leaving, so do privacy costs linked to living with astep-parent. When the quality of the nest is controlled for, the effect of parental incomeis closer to standard altruism, especially for younger children. This suggests thatparental housing decisions and income play an important role in the human capitalaccumulation of young adults.

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