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

Marco Manacorda () and Enrico Moretti

No 5116, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Family structure; Living arrangements; Two-sample iv (search for similar items in EconPapers)
JEL-codes: H55 J12 J61 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-eec, nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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