Intergenerational Co-residence and Schooling

This paper investigates how parents’ expectations of co-residence with their oldest son 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 reduce the relative profitability of residence with the oldest son with state-level investments that increase schooling returns. Through regressions that also condition on the total number of children and household savings, treating both as endogenous, I find that the expectation of co-residence with the oldest son reduces his attendance in school and schooling achievement.