Living Arrangements in Europe: Whether and Why Paternal Retirement Matters

Luca Stella, Università di Padova

This paper uses retrospective micro data from eleven European countries to investigate the role of paternal retirement in explaining children's decisions to leave the parental home. To assess causality, I use a bivariate discrete-time hazard model with shared frailty and exploit over time and cross-country variation in early retirement legislation. Overall, the results indicate a positive and significant influence of paternal retirement on the probability of first nest-leaving of children residing in Southern European countries. By contrast, there is no evidence of significant effects on children living in Northern and Central European countries. I then discuss the potential mechanisms by which paternal retirement may affect children's nest-leaving. My results suggest that the increase in children's nest-leaving around paternal retirement does not appear to be justified by changes in parents' budget constraints. Rather, one must probably look for channels involving negative externalities in preferences between parents and children.