Fostering Household Formation: Evidence from a Spanish Rental Subsidy

Abstract

In Southern Europe youngsters leave their parental home significantly later than in Northern Europe and the United States. In this paper, we study the effect of a monthly cash subsidy on the probability that young adults live apart from parents and childbearing. The subsidy, introduced in Spain in 2008, is conditional on young adults renting accommodation, and it amounts to almost 20% of the average youngsters’ wage. Our identification strategy exploits the subsidy eligibility age threshold to assess the causal impact of the cash transfer. Difference-in-Differences estimates show positive effects of the policy on the probability of living apart from parents, living with a romantic partner, and childbearing for 22 year-olds compared to 21 year-olds. Results persist when the sample is expanded to include wider age ranges. The effect is larger among young adults earning lower incomes and living in high rental price areas. This is consistent with the hypothesis that youngsters delay household formation because the cost is too high relative to their income.

Emancipation under the great recession in Spain

“…Overall, the policy has no significant effect but the bias mentioned above may be in operation invalidating the results. Our results differ in this respect from Aparicio-Fenoll and Oppedisano (2015). There are several potential reasons for this discrepancy.…”

Should I stay or should I go? Sibling effects in household formation

“…The coe¢ cient in the full sample indicates that subsidy eligibility increases the propensity to leave the nest by 5 percent. These estimates are higher than those obtained by Aparicio and Oppedisano (2014), who estimated a lower bound e¤ect of 3 percent. A possible explanation for the higher coe¢ cient could rely on the fact that the time frame used in the two papers is di¤erent: while in the previous paper we focused on the 2006-2009 time period, here we look at the 2005-2010 time period.…”

“…Numerous studies have produced empirical evidence documenting the existence of relevant siblings' interactions in many areas. 7 To the best of our knowledge, we are the …rst to explore the role of sibling e¤ects on the decision to leave parental home.…”

Intergenerational Earnings and Income Mobility in Spain

“…Therefore, most of the school and occupation decisions are taken when they still live with their parents, something which reinforces the influence of parents on children. Aparicio‐Fenoll and Oppedisano () show how over the past three decades, Southern European countries have witnessed a sharp increase in the fraction of young people living with their parents…”