Business Cycles and Household Forma tion. The Micro versus the Macro Labor Elasticity (joint with Jose Victor Rios-Rull and Greg Kaplan).
We provide a new evidence on the cyclical behavior of the household size and labor market ou tcomes of young people conditional on their living arrangements in the Unit ed States from 1979 to 2010. Household size is countercyclial, which is mos tly driven by young people moving into or delaying departure from the paren tal home. We document that young people living with the old work and earn l ess, and their hours and wages are more volatile relative to their peers li ving alone. We argue that living arrangements induce larger disparities in the labor market outcomes than age does. Motivated by these observations we provide a joint theory of household formation and labor market engagement including the business cycle. We lay down a theory where young individuals decide where to live depending on their relative wage rate, disutility of l iving with old and implicit transfers received from the old. We show differ ences in volatilities across age groups can be accounted for by incorporati ng household formation channel in to the real business cycle model, while r estricting the labor elasticity of the old to be within the range measured by microeconomists. We use our model to infer the implied labor supply elas ticities of the young and conclude young living together with the old have it 63.8% larger. Through the lens of the model we measure the size of the i mplicit transfers concluding they account for at least 163.2% percent of th e market consumption of the young living with the old. The inclusion of peo ple living in unstable households yields an implied aggregate, or macro, Fr isch elasticity that is at least around 62.7% larger than the assumed micro elasticity.
DTSTAMP:20260406T091547Z DTSTART:20160527T130000Z DTEND:20160527T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR