Does limited access to mortgage debt explain why young adults live with their parents?

Abstract

Young adults leave their parents' home at a higher rate in Northern Europe and the United States than in Southern Europe, with broad implications on labor mobility, intergenerational sharing of resources and on fertility. This paper assesses if differences in household structure can be traced back to restricted access to credit for the young. To study the causal impact of getting a loan on the probability of "leaving the nest", we exploit two reforms of a Portuguese program that subsidized interest rate on mortgages signed by low- and medium- income young adults. Using a unique dataset that merges a Labor Force Survey with administrative debt records, we estimate that getting a mortgage loan increases the rate of leaving home by between 31 and 54 percentage points. We combine those estimates with an European household panel to document that if our preferred estimates held for all countries, differential use of credit markets would explain between 16% and 20% of the North-South differences in home leaving. [resumen de autor]