The Economic Determinants of Young People's Household Formation

Abstract

The paper derives predictions about the impact of the price of housing, young adults’ income and parental income on the probability that a young adult lives apart from his/her parents. It shows that the predicted effect of the price of housing is intimately related to the price elasticity of housing demand. It uses longitudinal data on a cohort of Britons born in 1958 (surveyed in the National Child Development Study) to estimate dynamic models of first departure from the parental home, and particularly to estimate the impact of housing price on the timing and destination of first departure.