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Fostering Household Formation: Evidence from a Spanish Rental Subsidy

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  • Aparicio-Fenoll Ainhoa

    (Collegio Carlo Alberto, Turin, Italy)

  • Oppedisano Veruska

    (London Metropolitan University, Old Castle Street, London E17NT, UK Institute for Fiscal Studies, Ridgmunt Street 7, London WC1E7AE, UK)

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.

Suggested Citation

  • Aparicio-Fenoll Ainhoa & Oppedisano Veruska, 2015. "Fostering Household Formation: Evidence from a Spanish Rental Subsidy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 53-84, January.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:1:p:32:n:10
    DOI: 10.1515/bejeap-2014-0003
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    References listed on IDEAS

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    1. Sascha Becker & Samuel Bentolila & Ana Fernandes & Andrea Ichino, 2010. "Youth emancipation and perceived job insecurity of parents and children," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(3), pages 1047-1071, June.
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    6. Nuno Martins & Ernesto Villanueva, 2009. "Does High Cost of Mortgage Debt Explain Why Young Adults Live with Their Parents?," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 974-1010, September.
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    Cited by:

    1. Enrica Di Stefano, 2019. "Leaving your mamma: why so late in Italy?," Review of Economics of the Household, Springer, vol. 17(1), pages 323-347, March.
    2. Amuedo-Dorantes, Catalina & Borra, Cristina, 2021. "The role of non-contributory pensions on internal mobility in Spain," Labour Economics, Elsevier, vol. 70(C).
    3. Olga Cantó & Inmaculada Cebrián & Gloria Moreno, 2019. "Household precariousness and youth living arrangements in Spain: evidence for a complete business cycle," Working Papers 499, ECINEQ, Society for the Study of Economic Inequality.
    4. Catalina Amuedo-Dorantes & Cristina Borra, 2018. "Internal Mobility after the Expansion of the Welfare State: Evidence from Spain," RF Berlin - CReAM Discussion Paper Series 1806, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    5. Gianluca Cerruti & Gianluca Mazzarella & Mauro Migliavacca, 2023. "Employment protection legislation and household formation: evidence from Italy," Review of Economics of the Household, Springer, vol. 21(3), pages 913-939, September.
    6. Adamopoulou, Effrosyni, 2016. "Living Arrangements of the Youth: Determinants and Gender Differences/Patrones de convivencia de los jóvenes: Determinantes y diferencias por sexos," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 34, pages 35-44, Enero.
    7. Dirección General de Economía y Estadística, 2020. "El mercado de la vivienda en España entre 2014 y 2019," Occasional Papers 2013, Banco de España.
    8. Namkee Ahn & Virginia Sánchez-Marcos, 2017. "Emancipation under the great recession in Spain," Review of Economics of the Household, Springer, vol. 15(2), pages 477-495, June.
    9. Enrica Di Stefano, 2017. "Leaving your mamma: why so late in Italy?," Temi di discussione (Economic working papers) 1144, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    household formation; fertility; rental subsidy; conditional cash transfer;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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