Household Dissolution and the Choice of Alternative Living Arrangements Among Elderly Americans
NBER Working Paper No. 2338
For the elderly, housing choices are more complex than merely the choice of housing expenditure, dwelling size, and tenure. They also include the choice among alternative living arrangements such as living in one household with their adult children or sharing accommodations with other related or unrelated elderly. We first contrast living arrangements of elderly Americans with the population under age 65 and describe the changes from 1974 to 1983. We detect a growing discrepancy in household formation/dissolution patterns between the elderly and the younger population: after a steady decline in the 1970s, we observe a rapid increase in the rate of "doubled-up" young families in the beginning of the 1980s. No such development can be found among elderly Americans. Instead, the proportion of elderly living in- dependently steadily increases from 1974 to 1983. To explain this discrepancy, we estimate a multinomial choice model among living independently and six categories of alternative living arrangements. The main finding is the predominance of demographic determinants as opposed to economic variables. The difference in income growth between the young and the elderly -- real income declined for the young but increased for the elderly -- can explain only part of the discrepancy in household dissolution decisions. The remaining discrepancy must be attributed to inertia and low mobility rates.