Joint Decisions on Household Membership and Human Capital Accumulation of Youths: The Role of Expected Earnings and Local Markets

33 Pages Posted: 29 Nov 2000

See all articles by Gianna Claudia Giannelli

Gianna Claudia Giannelli

University of Florence - Dipartimento di Studi sullo Stato; IZA Institute of Labor Economics

Chiara Monfardini

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Date Written: August 2000

Abstract

This paper analyzes 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.

Keywords: Human capital, living arrangements, local labour markets, multinomial probit

JEL Classification: C25, J12, J24, J31

Suggested Citation

Giannelli, Gianna Claudia and Monfardini, Chiara, Joint Decisions on Household Membership and Human Capital Accumulation of Youths: The Role of Expected Earnings and Local Markets (August 2000). IZA Discussion Paper No. 191. Available at SSRN: https://ssrn.com/abstract=251992

Gianna Claudia Giannelli (Contact Author)

University of Florence - Dipartimento di Studi sullo Stato ( email )

Via S. Caterina d'Alessandria 3
Firenze 50129
Italy
+39-055-4622926 (Phone)
+39-055-472102 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chiara Monfardini

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
0039 51 2098148 (Phone)
0039 51 221968 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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