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Why Do Most Italian Young Men Live With Their Parents? Intergenerational Transfers and Household Structure

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  • Manacorda, Marco
  • Moretti, Enrico

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 co-residence. 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 SHIW micro-data from 1989 to 2000. The key econometric issue is the potential endogeneity of parental income. 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 labour 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 boys 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.

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  • Manacorda, Marco & Moretti, Enrico, 2005. "Why Do Most Italian Young Men Live With Their Parents? Intergenerational Transfers and Household Structure," CEPR Discussion Papers 5116, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5116
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    1. Enrica Di Stefano, 2019. "Leaving your mamma: why so late in Italy?," Review of Economics of the Household, Springer, vol. 17(1), pages 323-347, March.
    2. Enrica Di Stefano, 2017. "Leaving your mamma: why so late in Italy?," Temi di discussione (Economic working papers) 1144, Bank of Italy, Economic Research and International Relations Area.
    3. Laura Cavalli & Alessandro Bucciol & Paolo Pertile & Veronica Polin & Nicola Sartor & Alessandro Sommacal, 2012. "Modelling life-course decisions for the analysis of interpersonal and intrapersonal redistribution," Working Papers 25/2012, University of Verona, Department of Economics.
    4. Eva Sierminska & Yelena Takhtamanova, 2006. "Wealth Effects Out of Financial and Housing Wealth: Cross Country and Age Group Comparisons," LWS Working papers 4, LIS Cross-National Data Center in Luxembourg.
    5. Mario García-Ferreira & Ernesto Villanueva, 2007. "Employment risk and household formation: evidence from differences in firing costs," Working Papers 0737, Banco de España.
    6. 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.
    7. Chiuri, Maria Concetta & Del Boca, Daniela, 2008. "Household Membership Decisions of Adult Children," IZA Discussion Papers 3546, Institute of Labor Economics (IZA).
    8. Cobb-Clark, Deborah A., 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," IZA Discussion Papers 3309, Institute of Labor Economics (IZA).
    9. Kazuyasu Sakamoto, 2007. "Familial Support for Unemployed Youth," Hi-Stat Discussion Paper Series d06-201, Institute of Economic Research, Hitotsubashi University.

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    More about this item

    Keywords

    Family structure; Living arrangements; Two-sample iv;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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