Relocation, Intergenerational Transfers and Extended Family Insurance

Abstract

This paper studies how young adults make relocation decisions to take advantage of time transfers from parents as a form of insurance against adverse economic conditions. It first documents the fact that adult children who received negative income shocks during the Great Recession were more likely to move to live closer to parents. Only one tenth of these movers chose to reside within their parents' home. The paper sets up a stylized model to illustrate how the possibility of time transfers affects the labor supply and welfare of adult children, and compares its impact with other forms of intergenerational transfers. We utilize the model to explore whether parental time assistance to the child, aided by proximity, becomes a more common phenomenon when the labor market deteriorates.