Abstract
In this paper we document the behavior of emancipation over one of the biggest boom–bust cycles experienced by the Spanish economy. In principle, the economic difficulties faced by the Spanish youth during the last recession would have hampered a normal emancipation pace. However, we find that the proportion living away from parents among those aged 18–40 has not decreased but increased from 44 % during the boom (2005–2008) to 46 % during the bust (2009–2013). A simple decomposition reveals that this is mainly driven by the substantial rise in the emancipation rate among the full-time employed workers during the bust. To explain this change we discuss several factors such as macroeconomic conditions, rental subsidy policy, higher labor mobility, selection bias, reverse causation, time-lag in adjustment and secular trend.
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Notes
Economic costs and benefits of co-residence would depend on the contribution of each member on the family living costs. From the parental side, there are further costs in terms of forgone benefits of potential rental income of the space occupied by children or due to the impossibility of downsizing their housing. In Spain, it seems that parents finance most part of living costs of co-residing children and that downsizing house after children’s emancipation is uncommon.
Manacorda and Moretti (2006) find supportive evidence for Italy, although they interpret their results as parental preferences, cohabitation with children being a normal good for parents.
Dyrda et al. (2012) explore the importance of cyclical pattern of emancipation for aggregate labor supply in the US.
It should be noted that the results of all mentioned studies are not strictly comparable to ours as they analyze transitions to emancipation while we do co-residence status with parents. Furthermore, the positive effects of unemployment on home leaving in Ermish (1999) should be interpreted with caution as own income variable (highly correlated with employment status) is included and shows significant positive effects.
Kaplan (2012) shows that in the US moving in and out of the parental home is a valuable insurance channel against labor market risk.
They exploit two reforms of a Portuguese program that subsidized interest rate on mortgages signed by low- and medium-income young adults. They use a unique dataset that merges a Labor Force Survey with administrative debt records.
Lee and Painter (2013) show that the rate of young adult men living at parental home has grown rapidly from 14 to 19 % from the beginning of the recession until 2011.
Ermish (1999) examined the returns to parental home as well.
Although it seems most appropriate to use longitudinal data such as EU-Survey of Income and Living Conditions to study emancipation decisions, it has a problem of endogenous attrition that invalidates a robust analysis of this decision. Furthermore, the sample size is not large enough to observe a sufficient number of transitions.
In our sample of 18–40 years of age, the proportion of full-time student has increased from 13.6 to 16.4 % between the boom and the bust.
Although we are aware of the potential problems of bad control when individual labor market status variables are included along with the unemployment rate we decide to include them since our main interest is to explore the different behavioral changes by them. When we drop individual labor market status from the estimation, the effect of unemployment rate is significant and negative but small and the effect of the recession period becomes smaller but still significant and sizeable.
OLS estimation does not take into account of the dichotomous nature of the dependent variable (0 = not emancipated; 1 = emancipated) as in the models of logit or probit. However, the interpretation is convenient as we can interpret estimated coefficients as the effect of each variable on the probability of emancipation. In most cases the results are similar. Detailed discussion on the pros and cons can be found in Angrist and Pischke (2009).
When we include each year as a dummy variable, we observe a clear step-wise increase with a jump occurring between 2008 and 2009. The coefficients were between −0.034 and −0.037 for each boom years and less than 0.01 in absolute terms for the bust years.
The effect of unemployment is comparable to the result of Lee and Painter (2013) who estimated a negative effect of 11 % in the US sample which includes both genders.
We are aware of the endogeneity problem here especially in the female sample. Given the fragile identification in the absence of adequate exclusion variables in the bivariate dependent variable models and individual labor market status being one of the variables of our main interest we decided to include them in our regression while keeping in mind this problem in interpreting the result. In the Appendix, however, we provide the results of a bivariate model of two simultaneous decisions, emancipation and working status. The sign and the size of the effect of the recession variable are robust to this alternative specification.
The coefficient on the recession variable increases accordingly if we omit the eligibility variable from the regression as the policy was in effect mostly during the recession.
Ahn et al. (1999) find a significant positive effect of the exhaustion of unemployment benefits on workers’ willingness to move for work in Spain.
It may be related to the astonishing differences in the level of emancipation of young individual: in the US the emancipation rate for the age group 25–34 is about 89 %, whereas in Spain is only 35 %. Furthermore, homeownership rate for this group is about 48 % in 2007 in contrast to 73 % in Spain in 2004.
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Acknowledgments
We are grateful to two anonymous referees for their helpful comments. Virginia Sánchez-Marcos thanks the Spanish Ministry of Economy and Competitiveness for Grant ECO-2012-35820.
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Appendix
Appendix
In this Appendix we report two alternative models to the one we provide in Table 3 in order to explore the robustness of our results.
First, in Table 4 below we report the estimates of a probit model of the emancipation decision with the same covariates as in the OLS model in Table 3. The marginal effect of the recession variable is 0.0311 in the case of males and 0.0376 in the case of females. So they are both slightly smaller to the ones estimated with our benchmark model.
Second, in order to address the issue of endogeneity that arises regarding the labor market status of the individual in Table 5 we report the estimated coefficients of simultaneous equations of emancipation and working status using a bivariate probit model. To help the identification of the model we use house prices and eligibility to the rental subsidy that potentially affect the emancipation status but not the labor market status. In addition we include education dummies as covariates in the working equation. We find that the sign and the size of the effect of the recession variable are robust to this specification. The size of the marginal effect is 0.0262 for males and 0.0382 for females.
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Ahn, N., Sánchez-Marcos, V. Emancipation under the great recession in Spain. Rev Econ Household 15, 477–495 (2017). https://doi.org/10.1007/s11150-015-9316-7
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DOI: https://doi.org/10.1007/s11150-015-9316-7