Guilló, M.D. and A. Díaz
Investigaciones Económicas – Vol. XXIX, Mayo 2005
Abstract: We develop a theoretical model of the household where family ties impose a distortion on the job searching incentives of unemployed members and on the young adults’ decision of leaving the parental house. We find that the search efforts of unemployed family members are strategic substitutes, the young adult leaves the parental house only if his market wage is sufficiently high, and a low wage for the young implies that the mother’s and the young adult’s search efforts are low and, as a result, their probabilities of unemployment are high. The presence of a household good is crucial for these results. The model predictions are roughly consistent with the Spanish evidence.