Keywords: Life Cycle; Imperfect Credit Markets; Informal Insurance; Living Proximity.
Within the framework of family informal exchanges, we analyze whether parents influence their children's residential choices, particularly in the case of children being subject to binding credit constraints. Because of an age-increasing probability of care needs, parents enjoy the benefits of their children's proximity, and may reward them with a wealth transfer. We model a positive relationship between proximity and transfers: a) living closer to parents is associated with higher financial transfers and b) children's credit constraints strengthen the effect. Using the Bank of Italy Survey on Household Income and Wealth, we then test whether parental transfers affect the children's residential mobility and whether higher transfers induce greater proximity. Our results are in line with the model's predictions: parental transfers influence the children's residential choice; the effect is larger the higher the transfer and is more pronounced for credit-constrained households.