Moving back home: insurance against labor market risk

This paper uses an estimated structural model to argue that the option to move in and out of the parental home is an important insurance channel against labor market risk for youths who do not attend college. Using data from the NLSY97, I construct a new monthly panel of parent-youth coresidence outcomes and use it to document an empirical relationship between these movements and individual labor market events. The data is then used to estimate the parameters of a dynamic game between youths and their altruistic parents, featuring coresidence, labor supply and savings decisions. Parents can provide both monetary support through explicit financial transfers, and non-monetary support in the form of shared residence. To account for the data, two types of exogenous shocks are needed. Preference shocks are found to explain most of the cross-section of living arrangements, while labor market shocks account for individual movements in and out of the parental home. I use the model to show that coresidence is a valuable form of insurance, particularly for youths from poorer families. The option to live at home also helps to explain features of aggregate data for low-skilled young workers: their low savings rates and their relatively small consumption responses to labor market shocks. An important implication is that movements in and out of home can reduce the consumption smoothing benefits of social insurance programs.

Moving back home: insurance against labor market risk

This paper uses an estimated structural model to argue that the option to move in and out of the parental home is an important insurance channel against labor market risk for youths who do not attend college. Using data from the NLSY97, I construct a new monthly panel of parent-youth coresidence outcomes and use it to document an empirical relationship between these movements and individual labor market events. The data is then used to estimate the parameters of a dynamic game between youths and their altruistic parents, featuring coresidence, labor supply and savings decisions. Parents can provide both monetary support through explicit financial transfers, and non-monetary support in the form of shared residence. To account for the data, two types of exogenous shocks are needed. Preference shocks are found to explain most of the cross-section of living arrangements, while labor market shocks account for individual movements in and out of the parental home. I use the model to show that coresidence is a valuable form of insurance, particularly for youths from poorer families. The option to live at home also helps to explain features of aggregate data for low-skilled young workers: their low savings rates and their relatively small consumption responses to labor market shocks. An important implication is that movements in and out of home can reduce the consumption smoothing benefits of social insurance programs.

Boomerang kids: labor market dynamics and moving back home

This paper examines the relationship between the dynamics of parent-youth living arrangements and labor market outcomes for youths who do not go to college in the United States. The data come from a newly constructed panel data set based on retrospective monthly coresidence questions in the NLSY97. This is the first data set containing information on the labor market circumstances of youths at the time of movements in and out of the parental home. Based on estimates from duration models that allow for unobserved heterogeneity, I find that moving from employment to non-employment increases the hazard of moving back home in a given month by 64% for males and 71% for females. These results suggest that labor market factors play an important role in determining the dynamics of parent-youth living arrangements and that coresidence may be an important way in which insurance against labor market shocks takes place within the family.Labor economics ; Housing

Inequality and the Lifecycle

I structurally estimate an incomplete markets lifecycle model with endogenous labor supply, using data on the joint distribution of wages, hours and consumption. The model is successful at matching the evolution of both the first and second moments of the data over the lifecycle. The key challenge for the model is to generate declining inequality in annual hours worked over the first half of the working life, while respecting the constraints imposed by the data on consumption and wages. I argue that this is a robust feature of the data on lifecycle labor supply that is strongly at odds with the intra-temporal first order condition for labor supply. Allowing for a realistic degree of involuntary unemployment, coupled with preferences that feature nonseparability in the disutility of the extensive and intensive margins of hours worked, allows the model to overcome this challenge. The results imply that labor market frictions are important in jointly accounting for observed cross-sectional inequality in labor supply and consumption and may have quantitative relevance for analyses that exploit the intra-temporal first-order condition for labor.Structural Estimation, Inequality, Lifecycle, Labor Supply, Incomplete Markets, Consumption, Unemployment

Human capital values and returns: bounds implied by earnings and asset returns data

We provide theory for calculating bounds on both the value of an individual’s human capital and the return on an individual’s human capital, given knowledge of the process governing earnings and financial asset returns. We calculate bounds using U.S. data on male earnings and financial asset returns. The large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose. However, when aggregate shocks are the only source of earnings risk, both bounds are tight.

Interstate migration has fallen less than you think: consequences of hot deck imputation in the Current Population Survey

We show that the significant drop in the annual interstate migration rate between the 2005 and 2006 Current Population Surveys is a statistical artifact. The Census Bureau’s imputation procedure for dealing with missing data before the 2006 survey year inflated the estimated interstate migration rate. An undocumented change in the procedure corrected the problem for the 2006 and later surveys, thus reducing the estimated migration rate. The change in imputation procedures explains 90 percent of the reported decrease in interstate migration between 2005 and 2006, and 42 percent of the decrease between 2000 (the recent high-water mark) and 2010. After we remove the effect of the change in procedures, we find that the annual interstate migration rate follows a smooth downward trend from 1996 to 2010. The 2007–2009 recession is not associated with any additional decrease in interstate migration relative to trend.

Human Capital Values and Returns:Bounds Implied By Earnings and Asset Returns Data

We provide theory for calculating bounds on both the value of an individualÂ’s human capital and the return on an individualÂ’s human capital, given knowledge of the process governing earnings and financial asset returns. We calculate bounds using U.S. data on male earnings and financial asset returns. The large idiosyncratic component of earnings risk implies that bounds on values and returns are quite loose. However, when aggregate shocks are the only source of earnings risk, both bounds are tight.Value of Human Capital, Return on Human Capital, Asset Pricing

Interstate migration has fallen less than you think: consequences of hot deck imputation in the Current Population Survey

We show that much of the recent reported decrease in interstate migration is a statistical artifact. Before 2006, the Census Bureau’s imputation procedure for dealing with missing data in the Current Population Survey inflated the estimated interstate migration rate. An undocumented change in the procedure corrected the problem starting in 2006, thus reducing the estimated migration rate. The change in imputation procedures explains 90 percent of the reported decrease in interstate migration between 2005 and 2006, and 42 percent of the decrease between 2000 (the recent high-water mark) and 2010. After we remove the effect of the change in procedures, we find that the annual interstate migration rate follows a smooth downward trend from 1996 to 2010. Contrary to popular belief, the 2007–2009 recession is not associated with any additional decrease in interstate migration relative to trend.

UNDERSTANDING THE EFFECTS OF EARLY MOTHERHOOD IN BRITAIN : THE EFFECTS ON MOTHERS

This paper examines the socio-economic consequences of teenage motherhood for a cohort of British women born in 1970. We employ a number of methods to control for observed and unobserved differences between women who gave birth as a teenager and those who do not. We present results from conventional linear regression models, a propensity score matching estimator, and an instrumental variable estimator that uses miscarriage data to control for unobserved characteristics influencing selection into teenage motherhood. We consider the effects on equivalised family income at age 30, and its constituent parts. We find significant negative effects of teenage motherhood using methods that control only for observed characteristics using linear regression or matching methods. However once unobserved heterogeneity is also taken into account, the evidence for large negative effects becomes much less clear-cut. We look at older and younger teenage mothers separately and find that the negative effects are not necessarily stronger for teenagers falling pregnant before age 18 compared with those falling pregnant between 18 and 20, which could further suggest that some of the negative effects of teenage motherhood are temporary.teenage pregnancy ; miscarriage ; instrumental variables

Higher education funding reforms in England : the distributional effects and the shifting balance of costs

This paper undertakes a quantitative analysis of substantial reforms to the system of higher education (HE) finance first announced in 2004 and then revised again in July 2007. The reforms introduced deferred fees for HE, payable by graduates through the tax system in the form of income-contingent repayments on loans subsidised by the government. Lifetime earnings that have been simulated by the authors using innovative methods, are used to analyse the likely distributional consequences of the reforms for graduates. It is shown that graduates with low lifetime earnings will pay less for their HE than graduates higher up the lifetime earnings distribution compared to the system operating before the reforms. Taxpayers will bear substantial costs due to the interest rate and debt write-off subsidies. The extent to which the reforms are likely to shift the balance of funding for HE between the public and private sector is also analysed, as well as the likely distributional consequences of a number of variations to the system such as removing the interest subsidy from the loans