Saving and Cohabition: The Economic Consequences of Living with ones Parents in Italy and the Netherlands

Abstract The paper deals with the effects of cohabitation of grown children with their parents on household saving, using data from Italy and the Netherlands. It presents a two-period game-theoretical model where the child has to decide whether to move out of the parental home. This decision is affected by transaction costs, the child's preference for independence, and by the consumption loss induced by the move (consumption is a public good while the child lives in the parental home). We show that the child's income share affects the household saving decision, in contrast with predictions of... Mehr ...