Intergenerational co-residence and schooling

This paper investigates how parents’ expectations of co-residence with their children affects schooling outcomes. Using an overlapping generations model, the effect is shown to be ambiguous; it depends on how schooling affects life cycle income profiles. The empirical analysis utilizes household data that reports young parents’ expectations regarding residence in old age and also provides measures of schooling achievement for their children. Identification comes from interactions of demographic shocks that differentially affect the probability of co-residence with specific children with measures that affect the profitability of the inter-generational contract with children relative to an autarchic option whereby parents live alone but can still enter into consumption smoothing contracts with members of their extended family network. Through regressions that also condition on the total number of children, the ratio of sons to total children and household savings. I find that the expectation of co-residence with a child reduces the child’s attendance in school and schooling achievement.