Discussion Paper No.1607

Abstract :
We examine the effects of public pensions on location patterns in a family, using a two-period model of residential choices, in which the child chooses her location in the first period, and the aged parents decide whether or not to move to their child’s location in the second period. The child is altruistic toward the parents, and provides them with attention as well as financial support in two ways: income transfers and contribution to family public goods. We find that, even if the parents and child live in the same home under a certain level of public pensions, the child eventually chooses to live in a location with potential for highest earnings, where the parents would not move, as the level of public pension rises.

JEL code: H41, H55, J10