Academic journal article Journal of Economics and Economic Education Research

Why Are More Men Living with Their Parents?

Academic journal article Journal of Economics and Economic Education Research

Why Are More Men Living with Their Parents?

Article excerpt

INTRODUCTION

The increase in young adults living with their parents has drawn attention recently in both academia and the popular press. (1) The 2011 Census revealed the percentage of 25-34 year old men living at home grew from approximately 13 percent in 2001 to 17 percent in 2011--a 31 percent increase in just over 10 years (2). Since that time, the percentage has remained elevated and was 16.8 percent as of 2013. This is not a merely a short-run impact of the Great Recession of 2007-2009 but is a trend that has existed over recent decades (3). Moreover, the patterns are similar for young adults, regardless of socioeconomic status, and exist in many western European countries. Though many of the claims by the popular press are suspect, the overall trend is worrisome, especially for 25 through 34-year olds who are traditionally attaining their highest level of education, starting their careers, purchasing their first home and experiencing their first marriage and providing their own health and car insurance during this age period. What factors are driving this cohabitation and what do they bode for the future?

Answers to this question are provided from both the economics literature and the sociology literature. Economists focus on the constraints to independent living faced by adults that include wages, employment, housing prices and the burdens of consumer and student debt. Sociologists explore the preferences of young adults and examine factors such as the median age of first marriage, the sex-ratio and birth rates which may contribute to the social stigma or acceptance that comes from adults co-residing with their parents.

This paper tests both sociological and economic theories by constructing an econometric model with data for 25-34 year old males from the United States over the period 1983 to 2013. The time series data provide insight into this cohort's long-term trend and short-term adaptations to recessions that occurred over this period. Regressors are carefully chosen to avoid spurious results from trending variables and potentially high multicollinearity. Regression results indicate that sociological factors such as the birth rate and the average age of first marriage and economic variables, such as the rent-to-home price ratio, unemployment among the cohort and their real wages, have significant explanatory power. Somewhat surprisingly, increases in student loans and credit card debt appear statistically insignificant.

The paper is organized as follows. Section 2 examines the empirical literature from both economics and sociology on adult-parent cohabitation. It reveals that the unemployment rate, real wages, costs of living expenses and debt among the male 25-34 cohort tell only a part of the story. Changes in social norms such as average marriage age, the birth rate and other social factors are important as well. Section 3 incorporates the empirical results into a standard consumer optimization model to provide insight into the relevant econometric model. Section 4 examines the data and methodology. Section 5 presents empirical results and section 6 concludes.

LITERATURE REVIEW

Economic constraints facing young adults, such as low or declining real wages, high unemployment and increasing costs of living, have been studied as causal factors in adult-parent cohabitation. The most common empirical studies apply linear probability models (LPM) and logit models to longitudinal data. Early research by Card and Lemieux (2000) focused on the impact of labor market conditions on cohabitation on 16-24 year olds in the six provinces in Canada and the nine regions of the United States for the years 1970, 1980, 1990 and 1993. Using a linear probability model, the authors found that decreases in wages and in local employment-population ratios (the authors' proxy for business cycle conditions) raised the likelihood of adult-parent cohabitation among the 16-24 year-old cohort. …

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