Buying out of Familial Obligation: The Tradeoff between Financially Supporting versus Living with Elderly Parents in Urban China.

Abstract

For Chinese families, coresidence with elderly parents is both a form of support and a moderator of financial support. Previous literature on intergenerational support in Chinese societies has studied either coresidence or financial support independently, but not these two forms of support jointly. Using data from the 1999 "Study of Family Life in Urban China" in Shanghai, Wuhan, and Xi'an, we examined whether or not adult children, especially sons, buy out of the obligation to live with their parents by providing greater financial support. To account for the potential selection bias associated with coresidence, we treated coresidence and financial transfer as joint outcomes by using endogenous switching regression models. The results showed that children who coreside with their parents would have provided more financial support had they lived away, and children who live away from their parents would have provided more financial support had they coresided. These findings suggest a self-selection mechanism that maximizes children's interests rather than parents'.