JESS Seminar: Intergenerational Coresidence and Intrahousehold Allocation

Rates of co-residence of young adults with their parents have risen across the world in recent decades. In the UK an increase in co-residence has been particularly noticeable since the great recession. It has been associated with differential outcomes across cohorts along multiple dimensions: labour market outcomes have been worse for youths than for mature workers; cuts to public spending have been incident more on youths, and youths have particularly suffered from high housing costs and worsening credit conditions. In this paper we examine the welfare consequences of intergenerational co-residence using longitudinal data on financial satisfaction of each household member, combined with information on household expenditures. We use these data to estimate the value of co-residence in terms of the following components: the extent of economies of scale, resource sharing within the household, and direct utility costs/benefits of living with parents/children. Our findings are as follows: First, we estimate economies of scale in line with established measures. These economies provide a benefit of co-residence because the parental home is typically larger than the outside option. Second we find evidence of lump-sum transfers to young individuals within the parental home and a ‘tax’ on individual income. Finally, we find small direct benefits of co-residence with parents that decline with age.