“A Matching Model of Intergenerational Co-residence and Its Application in China”

Naijia Guo, The Chinese University of Hong Kong 

How do adult children and their parents decide to live together? While previous studies usually model co-residence as a non-cooperative or Nash bargaining game between one parent and one child, this paper models living arrangement as a two-sided matching game that captures not only the competition between multiple children, but also the competition between parents and in-laws. This is the first application of Shapley-Shubik-Becker framework in the co-residence context. Different from the marriage matching, family network plays an important role in the co-residence matching by restricting the possible co-residence arrangements. Using data from China Family Panel Study, we develop a novel way to simulate family network to fill in the missing marriage links in the data. We then estimate the model and use the empirical results to quantify the impact of tastes, housing costs, elderly care, and child care on family living arrangement. Our model and estimations also allow us to predict the effect of various policy changes on co-residence pattern and labor supply in China.