The Effect of Public Pensions on Residential Choice and Welfare in the Family

We examine the effects of public pensions on the residential choice of a child, who is altruistic, and provides agεd parents wìth attentìon as well as financìal support in two ways: income transfers and contribution to family public goods. We fmd that, even if the child lives wíth parents in the same home under a certain level of public pensions, the child eventually chooses to move away from the parents as the level of public pension rises. When the child moves, both the parents' and chi1d’s welfare may decrease. Nevertheless, the optimal level of public pensions is positive under reasonable parameter values in the social welfare function.