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Joint Decisions on Household Membership and Human Capital Accumulation of Youths: The role of expected carnings and labour market rationing

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Abstract

This paper focuses on the youth’s decisions on household formation and human capital investment - in further education or work experience - and the factors influencing these choices. While previous studies limited their analyses to decisions concerning the living arrangements and the labour market, the choice set is extended here to take into account other alternatives. The decisions of either remaining in the parental household or going to live with a partner are modelled jointly with those of either entering the labour market (i.e. investing in work experience) or investing in higher (university) education. Using the Bank of Italy 1995 Sample Survey on Italian Households, a multinomial probit model estimates the probabilities of the different pairs of outcomes. The results highlight the crucial role of economic variables in shaping young adults’ decisions. Among these, expected lifetime earnings from attending university have the most important impact on the choice of studying and coresiding. Implications for policy stem from the estimated impact of housing and labour market performance variables on young adults’ decisions. In particular, a sizeable discouraged worker effect, inducing young people to study when the local unemployment rate is high, is detected. The effect of the cost of housing in delaying young workers’ decisions to leave the parental home and form a new household is also remarkable. Two policy experiments are presented. The former measures the impact of housing policies targeted at reducing housing cost on the probability of marriage. The latter measures the extent to which labour policies targeted at reducing youth unemployment would decrease the number of discouraged workers that choose to study.

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  • G. C. Giannelli & C. Monfardini, 2000. "Joint Decisions on Household Membership and Human Capital Accumulation of Youths: The role of expected carnings and labour market rationing," Working Papers 375, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:375
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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.
    2. Maite Martínez-Granado & Javier Ruiz-Castillo, 2002. "The decisions of Spanish youth: A cross-section study," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(2), pages 305-330.
    3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    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.
    6. Stern, Steven, 1989. "Rules of thumb for comparing multinomial logit and multinomial probit coefficients," Economics Letters, Elsevier, vol. 31(3), pages 235-238, December.
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    Cited by:

    1. Sascha O. Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2005. "Job Insecurity and Youth Emancipation: A Theoretical Approach," Diskussionsschriften dp0514, Universitaet Bern, Departement Volkswirtschaft.
    2. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2004. "Job Insecurity and Children’s Emancipation," IZA Discussion Papers 1046, Institute for the Study of Labor (IZA).
    3. Paola Giuliano, 2007. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 927-952, September.
    4. Hermann, Zoltán, 2005. "A helyi munkaerőpiac hatása a középfokú továbbtanulási döntésekre
      [The local labour markets effect on decisions to enter secondary-level education]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 39-60.
    5. Samuel Bentolila & Ildefonso Mendez & Francisco Maeso, 2015. "Leaving Home with a Partner," CESifo Working Paper Series 5381, CESifo Group Munich.
    6. Sascha Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2010. "Youth emancipation and perceived job insecurity of parents and children," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(3), pages 1047-1071, June.
    7. MAZZOTTA, Fernanda & PARISI, Lavinia, 2017. "What are the Role of Economic Factors in Determining Leaving and Returning to the Parental Home in Europe During the Crisis? Technical Details," CELPE Discussion Papers 151, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    8. Tindara Addabbo & Randi Kjeldstad, 2013. "Household affiliation of young adults in Italy and Norway. The significance of gender, sociocultural background, work and money," Discussion Papers 752, Statistics Norway, Research Department.
    9. Tindara Addabbo & Paula Rodr íguez-Modroño & Lina Gálvez-Muñoz, 2014. "Youth living in a couple. How women's labour supply adapts to the crisis. The case of Spain," Center for the Analysis of Public Policies (CAPP) 0114, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    10. Fernanda Mazzotta & Lavinia Parisi, 2015. "The effect of Employment on Leaving Home in Italy," Discussion Papers 8_2015, CRISEI, University of Naples "Parthenope", Italy.

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