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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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  • Giannelli, Gianna Claudia

    (University of Florence)

  • Monfardini, Chiara

    (University of Bologna)

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.

Suggested Citation

  • Giannelli, Gianna Claudia & Monfardini, Chiara, 2000. "Joint Decisions on Household Membership and Human Capital Accumulation of Youths - The role of expected earnings and local markets," IZA Discussion Papers 191, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp191
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    References listed on IDEAS

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    More about this item

    Keywords

    multinomial probit; local labour markets; living arrangements; Human capital;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • 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

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