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Does limited access to mortgage debt explain why young adults live with their parents?

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Author Info
Nuno Martins () (Universidade Nova de Lisboa)
Ernesto Villanueva () (Banco de España)

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Abstract

Young adults leave their parents' home at a higher rate in Northern Europe and the United States than in Southern Europe, with broad implications on labor mobility, intergenerational sharing of resources and on fertility. This paper assesses if differences in household structure can be traced back to restricted access to credit for the young. To study the causal impact of getting a loan on the probability of "leaving the nest", we exploit two reforms of a Portuguese program that subsidized interest rate on mortgages signed by low- and medium- income young adults. Using a unique dataset that merges a Labor Force Survey with administrative debt records, we estimate that getting a mortgage loan increases the rate of leaving home by between 31 and 54 percentage points. We combine those estimates with an European household panel to document that if our preferred estimates held for all countries, differential use of credit markets would explain between 16% and 20% of the North-South differences in home leaving.

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File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0628e.pdf
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File Function: First version, October 2006
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Publisher Info
Paper provided by Banco de España in its series Banco de España Working Papers with number 0628.

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Length: 52 pages
Date of creation: Oct 2006
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Handle: RePEc:bde:wpaper:0628

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Related research
Keywords: living arrangements; family structure; credit markets;

Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rob Alessie & Agar Brugiavini & Guglielmo Weber, 2005. "Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands," NBER Working Papers 11079, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Nuno C. Martins & Ernesto Villanueva, 2003. "The Impact of Interest-rate Subsidies on Long-term Household Debt: Evidence from a Large Program," Economics Working Papers 713, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  3. David Card & Thomas Lemieux, 1997. "Adapting to Circumstances: The Evolution of Work, School, and Living Arrangements Among North American Youth," NBER Working Papers 6142, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Del Boca, Daniela & Lusardi, Annamaria, 2002. "Credit Market Constraints and Labor Market Decisions," IZA Discussion Papers 598, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding Are Legal Limits? Transitions from Temporary to Permanent Work in Spain," IZA Discussion Papers 782, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Olivier Blanchard & Pedro Portugal, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March. [Downloadable!] (restricted)
  7. Paola Giuliano, 2004. "On the determinants of living arrangements in Western Europe: Does Cultural Origin Matter?," Econometric Society 2004 North American Summer Meetings 68, Econometric Society.
  8. Borsch-Supan, Axel, 1986. "Household formation, housing prices, and public policy impacts," Journal of Public Economics, Elsevier, vol. 30(2), pages 145-164, July. [Downloadable!] (restricted)
  9. Arnstein Aassve & Simon Burgess & Andrew Chesher & Carol Propper, 2002. "Transitions from home to marriage of young Americans," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 1-23. [Downloadable!]
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  10. Becker, Sascha & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2004. "Job Insecurity and Children's Emancipation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  11. Chiuri, Maria Concetta & Jappelli, Tullio, 2001. "Financial Market Imperfections and Home Ownership: A Comparative Study," CEPR Discussion Papers 2717, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Anne Laferrere ; David Le Blanc, 2003. "Gone with the Windfall : How do Housing Allowances Affect Student Co-residence ?," Working Papers 2003-36, Centre de Recherche en Economie et Statistique. [Downloadable!]
  13. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April. [Downloadable!] (restricted)
  14. Antonia Díaz & M. Dolores Guilló, 2005. "Family ties and labor supply," Investigaciones Economicas, Fundación SEPI, vol. 29(2), pages 289-329, May. [Downloadable!]
  15. Steven J. Haider & Kathleen McGarry, 2005. "Recent Trends in Resource Sharing Among the Poor," NBER Working Papers 11612, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mendez, Ildefonso, 2008. "The Role of Partnership Status and Expectations on the Emancipation Behaviour of Spanish Graduates," MPRA Paper 8655, University Library of Munich, Germany. [Downloadable!]
  2. Chiuri Maria Concetta & Del Boca Daniela, 2007. "Living arrangements in Europe: exploring gender differences and institutional characteristics," Department of Economics Working Papers 200709, University of Turin. [Downloadable!]
    Other versions:
  3. Maria Concetta Chiuri & Daniela Del Boca, 2008. "Household Membership Decisions of Adult Children: Does Gender and Institutions Matter?," Carlo Alberto Notebooks 75, Collegio Carlo Alberto. [Downloadable!]
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