A wide heterogeneity characterises the timing of independent house-
hold formations across both European countries and Italian regions.
This paper analyses the determinants of this variability and the extent
to which it depends on the economic environment. Income uncertainty,
driven mainly by labour market conditions, leads to an option value
associated with living with parents and strengthens the precautionary
motive for saving. The negative evect of uncertainty is even widened by
credit rationing, since constrained agents cannot spread negative im-
pact out over time. Moreover, if borrowing is constrained, co-residence
with parents eases consumption smoothing when income increases over
the life cycle and fosters wealth accumulation to face moving costs.
Nest leaving is jointly analysed with marriage choice: Personal and
market characteristics are allowed to have diverent impacts on the
probability of being single or married. The empirical analysis is based
on the Bank of Italy's Survey on Household Income andWealth (SHIW)
and exploits regional heterogeneity in local market conditions to assess
these characteristics' evects on youth living arrangements. The results
show the economic environment has a relevant impact on the house-
hold membership of young adults.
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