The Dynamics of Household Membership and Labour Supply Decisions of Young Adults in Britain: A Panel Data Approach
University of Essex, UK
This paper examines the determinants of the decision to leave the parental home and the decision to work for young adults using the first fifteen waves of the British Household Panel Survey (BHPS). We employ a bivariate dynamic model that takes into account unobserved heterogeneity across individuals and find strong evidence of gender differences in both the relationship between the two decisions and the way these are affected by personal and parental characteristics. Furthermore, current parental incomes do not have a strong effect or in most cases they do not have an effect at all. We augment previous research done on this area by examining the effect of current parental labour supply which could affect young adults’ decisions through time spent in the household rather than income. Finally we show that the two decisions should be studied one in the presence of the other since they are related through both observed and unobserved factors.
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