IZA DP No. 2042: Living Arrangements in Western Europe: Does Cultural Origin Matter?
published in: Journal of the European Economic Association, 2007, 5 (5), 927-952
Why are there such large differences in living arrangements across Western European countries? Conventional economic analyses have not been successful in explaining differences in living arrangements and particularly the dramatic increase in the fraction of young adults living with their parents in Mediterranean Europe. This paper presents a cultural interpretation. I argue that the sexual revolution of the 1970s – by liberalizing parental attitudes – had a differential impact on living arrangements in Northern and Southern Europe on account of the closer parent-child ties in Southern Europe. Such an explanation can easily explain both the shift in living arrangements over time and also observed North-South differentials. It receives support from data on the living arrangements of second-generation immigrants in the US. Both in 1970 and 2000, by country of origin, the US living arrangements of second-generation immigrants mimic those in Europe across countries; similarly the changes in the US across time by country of origin mimic the European changes. This duplication of the European pattern in a neutral environment, with the same unemployment benefits, the same welfare code and the same macroeconomic conditions suggests a major role for culture in determining living arrangements.