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Why do Most Italian Young Men Live with Their Parents? Intergenerational Transfers and Household Structure

56 Pages Posted: 10 Aug 2005  

Marco Manacorda

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Queen Mary, University of London; Centre for Economic Policy Research (CEPR)

Enrico Moretti

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: June 2005

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 labor 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

JEL Classification: H55, J12, J61

Suggested Citation

Manacorda, Marco and Moretti, Enrico, Why do Most Italian Young Men Live with Their Parents? Intergenerational Transfers and Household Structure (June 2005). CEPR Discussion Paper No. 5116. Available at SSRN: https://ssrn.com/abstract=781247

Marco Manacorda (Contact Author)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Queen Mary, University of London

Mile End Road
London, London E1 4NS
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Enrico Moretti

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://emlab.berkeley.edu/~moretti/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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

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