Living Arrangements in Europe: Whether and Why Paternal Retirement Matters

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, for both sons and daughters. By contrast, there is no evidence of significant effects on children living in Northern and Central European countries. I then discuss and test empirically the potential mechanisms by which paternal retirement may affect children's co-residence. I find that the increase in children's nest-leaving around the time of paternal retirement does not appear to be justified by changes in parental resources. Rather, one must probably look for channels involving the supply of informal child care provided by grandparents or the negative externalities in preferences between retired fathers and their children.