PhD Thesis Success: Stephen Hennessy

Stephen Hennessy successfully defended his thesis this August!

Stephen’s research focus’s on Quantitative Macroeconomics, Family Transfer’s and Parent-Child Co-Residence. Stephen also has an ongoing project at the Research Data Centre (RDC), using restricted micro data o trace migration flows of parents and children across Canada from 1980 onward.

Three Essays on Family Transfers and Implications for the Macroeconomy

Abstract

This thesis consists of three papers in quantitative macroeconomics that address the following questions: (1) How does the option to move home with parents provide insurance against labour market risk throughout the life cycle? (2) Can standard theories of parental altruism explain the empirical distribution of inter vivos transfers across the child income distribution? (3) To what extent have rising rental costs since 2000 contributed to the coincident rise in co-residence as well as changes in labour market search behaviour? Chapter 1 uses linked panel data from the Health and Retirement Study to document that job separations significantly increase the likelihood of moving home, even into middle age. A structural life-cycle model demonstrates that access to co-residence allows workers to search for higher-wage jobs at the cost of longer unemployment spells. Welfare gains from this insurance are equivalent to an approximately 70 percent increase in unemployment insurance benefits and remain large for consumers up to age 40. Chapter 2 shows parent and child incomes, parent assets, and rich demographic controls explain less than one fifth of the variation
in transfers from parents to adult children. I take this as evidence that canonical models of homogeneous altruism cannot account for parents’ transfer behaviour. I then develop an alternative model of heterogeneous altruism that generates transfers across the full distribution of child incomes. These distributional implications matter for policy evaluation, as homogeneous-altruism models misstate the extent of private familial support towards adult children. Chapter 3 evaluates how rising rental costs have altered labour market behaviour and co-residence decisions from 2000 to 2020. Rent increases consistent with the data account for roughly one third of the observed rise in co-residence among adults aged 20 to 40. Higher rental costs push workers both toward higher-wage jobs which require longer search durations as well as out of the labour force entirely. Rising rents impose the largest welfare costs on younger workers, whose limited savings constrain their ability to self-insure against higher housing expenses.

If you’d like to follow more of Stephen’s research you can visit his website.