A matching model of co-residence with a family network: Empirical evidence from China

Abstract

We develop a co-residence model between young adults and the elderly as an application of the Shapley-Shubik-Becker bilateral matching framework. This model captures competition between adult children and between parents and parents-in-law. Using micro data from China, we estimate our model by using a network simulation method to fill in partially unobservable marriage links. We find that our model explains the child-side and parent-side competitions observed in the data better than two alternative multinomial logit models with only one-side competition. In addition, counterfactual experiments quantify the effects of changes in the one-child policy and housing prices on intergenerational co-residence.