Panel Paper: Diverging Patterns in Geographic Mobility: Are Rental Housing Markets Driving Recent Trends?

Thursday, November 8, 2018
Coolidge - Mezz Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Sewin Chan1, Katherine O'Regan1 and Wei You1,2, (1)New York University, (2)Furman Center for Real Estate and Urban Policy

Geographic mobility is a crucial part of labor market adjustment and hence national economic growth – people move from depressed or low demand labor markets towards areas with greater opportunity where their labor is more productive. The geographic flexibility of the U.S. workforce has been seen as a key competitive advantage. For individuals, migration can buffer regional shocks and provide opportunities for economic advancement. But internal migration and its responsiveness to labor demand shocks in the U.S. have been declining. Cross-state migration has been falling even among young adults, historically the most mobile portion of the population. While there is no consensus on the drivers of the decline, research documents low and falling responsiveness to negative labor demand shocks, with responsiveness particularly weak among low education workers.

At the same time, there is another strand of literature on young adult household formation and coresidence with parents. The delay of young adults forming their own households, and the increase in adult children returning to live with their parents (so-called ‘boomeranging’) have both contributed to the increased share of young adults co-residing with parents. The literature has several explanations for increasing parental coresidence: higher housing costs, worse labor markets, increasing amounts of student debt and increased social acceptance for coresidence. Notably, most of the change in living arrangements is concentrated at lower levels of education.

While both literatures have framed migration or coresidence as a buffer against labor market and housing market risk, to our knowledge there is no research that pulls these two literatures together. In this paper, we attempt to do this, to consider both independent and co- residing residential options for various migration and household formation decisions of young adults.

Using the American Community Survey (ACS) and the Panel Study of Income Dynamics (PSID), we provide simple descriptive data and OLS regressions on three residential outcomes for young adults: co-residing with their parents, transitioning out from living with a parent, and returning to live with a parent after living elsewhere. We connect the migration and coresidence literatures by recognizing co-residing as a starting point, and as an option for migration decisions – including whether a young adult has lived elsewhere previously – in models of coresidence and household formation. We also recognize that this option is to a specific location and labor market, and incorporate the characteristics of that option in models of boomerang moves. This permits a better recognition of the interconnected margins of labor market and residential adjustments. In future versions of this paper, we will extend this work to more clearly distinguish short distance residential moves (which do not entail changing labor markets) from long distance moves (which do), estimating a nested logit model of the choice to move that incorporates the parental coresidence option. While our reported results are preliminary and descriptive, we believe we have demonstrated the importance of the parental coresidence option in understanding the location decisions of young adults.