Leaving the nest: parental income, housing and altruism

We propose a model in which high income altruistic parents help their children move out, while poorer constrained parents help them stay. Besides, parental housing is a non transferable good, and less housing consumption at the parents’ home induces to move out. The model is tested on French data. As predicted both poor and rich parents are more likely to see their children go than middle class parents and the quality of the nest matters. Lack of space in the parents’ home encourages leaving. However when parental income is instrumented, a rise in the parents’ income raises the propensity of the children to live independently at all levels of income: a 10 percent increase in parental income results in a 5 percent rise in the proportion of independent children. It suggests that French parents are altruistic and that unobserved characteristics prevent low income families from helping their children leave the nest.