ESRI Discussion Paper Series No.340
Living Arrangements and Family Formation in Japan

Naoki Takayama
Deputy Director, National Expenditure Division, Department of National Accounts, Economic and Social Research Institute, Cabinet Office, Government of Japan


The decisions to leave home and to marry are critical decisions that are at the foundation of family formation with tradeoffs between the benefits from parental altruism and the advantages of marriage. This research presents a parsimonious heterogeneous agent macroeconomic model and uses large-scale micro data on Japan to study both issues jointly. This paper proposes three possible drivers in the mechanism: (1) the stronger economy of scale in Japan generated by high living cost, (2) the weak bargaining position of women on the living arrangement when they marry, and (3) the gender wage gap and the career interruption cost for women. The results suggest that high living cost discourage people to marry and live without parents and the bargaining structure encourage them to stay single and live with their own parents. The wage structure seems to have relatively weaker effects. In addition, the estimates on the preference suggest that individuals prefer not to live with parents-in-law and desire to leave parents' home, while marrying potential spouse is preferable.

Structure of the whole text(PDF-Format 1 File)

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  2. page1
  3. page1
    1. Introduction
  4. page4
    2. Model
    1. page5
      2.1. Period Utility
      1. page5
        2.1.1 Staying Single
      2. page5
        2.1.2 Getting/Staying Married
    2. page6
      2.2 Choice of Marital and Living Status
    3. page7
      2.3 Matching
    4. page7
      2.4 Equilibrium
  5. page8
    3. Estimation and Simulation
    1. page8
      3.1. Parameters Determined outside the Model
      1. page8
        3.1.1 Wages
      2. page8
        3.1.2 Distribution
      3. page9
        3.1.3 Utility
    2. page9
      3.2 Estimation with Model
      1. page9
        3.2.1 Target Moments
      2. page10
        3.2.2 The Baseline
    3. page10
      3.3 Simulation
      1. page10
        3.3.1 OECD Equivalence Scale
      2. page11
        3.3.2 Commitment
      3. page11
        3.3.3 Gender Wage Gap
  6. page12
    4. Conclusion
  7. page14
  8. page15
    1. page15
      Figure 1: Wage Profile
    2. page16
      Figure 2: Extensive-Form Game: Lack of Commitment
    3. page17
      Figure 3: Extensive-Form Game: Commitment
  9. page18
    1. page18
      Table 1: Marital and Living Status of Japanese Adults
    2. page19
      Table 2: Matrix of Status
    3. page20
      Table 3: Wage Structure
    4. page21
      Table 4: Education
    5. page22
      Table 5: Baseline: Data vs Model for Targets
    6. page23
      Table 6: Baseline: Estimated Parameters
    7. page24
      Table 7: OECD Equivalence Scale
    8. page25
      Table 8 Regression results (pseudo-panel data, first difference specification, homeowners only)
    9. page26
      Table 9: Gender Wage Gap but No Career Interruption Cost
    10. page27
      Table 10: Career Interruption Cost but No Other Gender Wage Gap
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