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

  • Nuno Martins

    ()

    (Universidade Nova de Lisboa)

  • Ernesto Villanueva

    ()

    (Banco de España)

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/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0628e.pdf
File Function: First version, October 2006
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0628.

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Length: 52 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:bde:wpaper:0628
Contact details of provider: Web page: http://www.bde.es/
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  1. Sascha O. Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2004. "Job Insecurity and Children's Emancipation," CESifo Working Paper Series 1144, CESifo Group Munich.
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  12. Nuno C. Martins & Ernesto Villanueva, 2003. "The Impact of Interest-rate Subsidies on Long-term Household Debt: Evidence from a Large Program," Working Papers w200314, Banco de Portugal, Economics and Research Department.
  13. 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.
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  17. repec:ese:iserwp:2001-18 is not listed on IDEAS
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