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Why do most Italian youths live with their parents?: intergenerational transfers and household structure

Manacorda, Marco and Moretti, Enrico (2006) Why do most Italian youths live with their parents?: intergenerational transfers and household structure. Journal of the European Economic Association, 4 (4). pp. 800-829. ISSN 1542-4766

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Abstract

More than 80% of Italian men aged 18–30 live with their parents. We argue that one contributing factor to this remarkably high rate of cohabitation is parents' tastes for coresidence. In order to investigate the role of parental preferences, we estimate the effect of exogenous changes in parental income on rates of cohabitation in Italy using Survey of Households' Income and Wealth (SHIW) micro data from 1989 to 2000. In order to identify a source of exogenous variation in parental income, we use changes in fathers' retirement age induced by the 1992 reform of the Italian Social Security system as an instrumental variable for parental income. By raising retirement age, this reform forced some fathers to remain in the labor market longer than they would have otherwise, therefore raising their disposable income. We use a two-sample instrumental variable (TSIV) strategy. Our TSIV estimates indicate that a rise in parents' income significantly raises the children's propensity to live at home: A 10% increase in annual parental income results in approximately a 10% rise in the proportion of men living with their parents. Although we cannot definitely rule out alternative interpretations, these results are consistent with our hypothesis that cohabitation is a normal good for Italian parents.

Item Type: Article
Official URL: http://mitpress.mit.edu/jeea
Additional Information: © 2005 MIT Press
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions
J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends and Forecasts
J - Labor and Demographic Economics > J1 - Demographic Economics > J12 - Marriage; Marital Dissolution; Family Structure
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 10 Sep 2008 13:36
URL: http://eprints.lse.ac.uk/15510/

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