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Joint Decisions on Household Membership and Human Capital Accumulation of Youths - The role of expected earnings and local markets

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Author Info
Giannelli, Gianna Claudia () (University of Florence and IZA, Bonn)
Monfardini, Chiara (University of Padua)

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Abstract

This paper analyses the effects of expected earnings and local markets conditions on the behaviour of young adults with high school diplomas. Decisions to either remain in the parental home or form a new household are modelled jointly with those of either gaining work experience or investing in a university education. A multinomial probit model estimates the probabilities of the different pairs of outcomes. Expected lifetime earnings of youths are modelled and estimated, and serve as choice-specific regressors in the probit model. According to our results, the most important factor influencing the choice of studying and residing with parents is expected lifetime earnings from a university degree. A sizeable discouraged worker effect induces young people to study when labour market opportunities are poor. The cost of housing greatly influences the choice of working and living in the parental home. Two policy experiments offer some suggestions for policy makers. The first one measures the extent to which housing policies, targeted at reducing housing costs, would allow youths to live away from the parental home. A second indicates how much labour market policies, targeted at lowering youth unemployment to some desired levels, could decrease the number of discouraged workers that choose to study.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 191.

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Length: 33 pages
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:iza:izadps:dp191

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Related research
Keywords: Human capital; living arrangements; local labour markets; multinomial probit;

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Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

References listed on IDEAS
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  1. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May. [Downloadable!] (restricted)
  2. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Intergenerational Support and the Life-Cycle Incomes of Young Men and Their Parents: Human Capital Investments, Coresidence, and Intergenerational Financial Transfers," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 84-112, January. [Downloadable!] (restricted)
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
  5. McElroy, Marjorie B, 1985. "The Joint Determination of Household Membership and Market Work: The Case of Young Men," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 293-316, July. [Downloadable!] (restricted)
  6. Ermisch, John F, 1996. "Parental Support for Human Capital Investment by Young Adults," CEPR Discussion Papers 1536, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Maite Martínez & J. Ruiz Castillo, . "The decisions of Spanish youth: A cross-section study," Studies on the Spanish Economy 14, FEDEA. [Downloadable!]
    Other versions:
  8. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May. [Downloadable!] (restricted)
  9. Patricia Rice, 1999. "The impact of local labour markets on investment in further education: Evidence from the England and Wales youth cohort studies," Journal of Population Economics, Springer, vol. 12(2), pages 287-312. [Downloadable!] (restricted)
  10. Luigi Guiso & Tullio Jappelli, 1999. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," CSEF Working Papers 17, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  11. Stern, Steven, 1989. "Rules of thumb for comparing multinomial logit and multinomial probit coefficients," Economics Letters, Elsevier, vol. 31(3), pages 235-238, December. [Downloadable!] (restricted)
  12. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, vol. 8(1), pages 103-129, January. [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. Deborah A. Cobb-Clark, 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," CEPR Discussion Papers 568, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
    Other versions:
  2. Sascha O. Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2005. "Youth Emancipation and Perceived Job Insecurity of Parents and Children," IZA Discussion Papers 1836, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Francesco C. Billari & Guido Tabellini, 2008. "Italians are Late: Does it Matter?," NBER Chapters, in: Demography and the Economy National Bureau of Economic Research, Inc. [Downloadable!]
  4. Algan, Yann & Cahuc, Pierre, 2005. "The Roots of Low European Employment: Family Culture?," CEPR Discussion Papers 5169, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Sascha O. Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2005. "Job Insecurity and Youth Emancipation: A Theoretical Approach," IZA Discussion Papers 1869, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. repec:ese:iserwp: is not listed on IDEAS
  7. 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!]
    Other versions:
  8. Flannery, Darragh & O'Donoghue, Cathal, 2009. "The Determinants of Higher Education Participation in Ireland: A Micro Analysis," The Economic and Social Review, Economic and Social Studies, vol. 40(1), pages 73-107. [Downloadable!]
  9. Lauer, Charlotte, 2000. "Enrolments in higher education in West Germany : the impact of social background, labour market returns and educational funding," ZEW Discussion Papers 00-59, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  10. Paola Giuliano, 2006. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," IZA Discussion Papers 2042, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Gallice, Andrea, 2007. "Education, Dynamic Signaling and Social Distance," Discussion Papers in Economics 1364, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  12. 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:
  13. 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!]
  14. Chiuri, Maria Concetta & Del Boca, Daniela, 2008. "Household Membership Decisions of Adult Children," IZA Discussion Papers 3546, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Antonia Díaz & M. Dolores Guilló, 2005. "Family ties and labor supply," Investigaciones Economicas, Fundación SEPI, vol. 29(2), pages 289-329, May. [Downloadable!]
  16. Francesco Pastore, 2005. "To Study or to Work? Education and Labour Market Participation of Young People in Poland," IZA Discussion Papers 1793, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Victoria Prowse, 2007. "Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity," Economics Series Working Papers 337, University of Oxford, Department of Economics. [Downloadable!]
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