Intergenerational Coresidence and Income Shocks: Evidence from Germany

Enrica Croda, University of California, Los Angeles

This paper investigates intergenerational coresidence of elderly parents with their adult children in Germany using the GSOEP for the period 1984-1998. I take advantage of 15 years worth of panel data on West Germans to examine changes in residency patterns over time and exploit the economic shock accompanying the reunification of East and West Germany to assess the responsiveness of coresidence to economic changes. The empirical analysis provides evidence that financial variables and changes in these variables are important factors in the living arrangement decisions. Both in West and East Germany, greater independence comes with greater financial resources indicating that independence is a preferred outcome. In addition, the reduction of economic barriers induced by reunification has increased dramatically the propensity of Eastern elderly to live independently. Over time the living arrangement behavior of East Germans is converging towards the living arrangement behavior of West Germans.