Income Pooling between Australian Young Adults and Their Parents

31 Pages Posted: 22 May 2012

See all articles by Robert V. Breunig

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy

Rebecca J. McKibbin

Australian National University (ANU) - Research School of Social Sciences (RSSS)

Date Written: June 2012

Abstract

We test whether young adults who co‐reside with their parents derive influence over household‐level expenditure by earning income. We propose a new variant of the Engel curve consistent with the Quadratic Almost Ideal Demand System, which allows a simple test of income pooling. Our tests suggest that young adults and parents mostly pool their income — pooling is not rejected for 8 out of 12 expenditure categories. We are more likely to reject income pooling between young adults and their parents in those expenditure categories where the model fit is highest, so our results may be interpreted as an upper bound on income pooling. We also apply our tests to income pooling between husbands and wives and find that pooling holds for 9 out of 12 expenditure categories. We find the opposite relationship with fit — expenditure categories where fit is poor are those where we are most likely to reject income pooling.

JEL Classification: C14, D13, J12

Suggested Citation

Breunig, Robert V. and McKibbin, Rebecca J., Income Pooling between Australian Young Adults and Their Parents (June 2012). LABOUR, Vol. 26, Issue 2, pp. 235-265, 2012, Available at SSRN: https://ssrn.com/abstract=2064426 or http://dx.doi.org/10.1111/j.1467-9914.2011.00541.x

Robert V. Breunig (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia
61261252148 (Phone)

HOME PAGE: http://https://crawford.anu.edu.au/crawford_people/content/staff/rbreunig.php

Rebecca J. McKibbin

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia

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