Discussion of „Employment risk and the living arrangements of young adults“

1. Discussion of„Employment risk and the living arrangements of young adults“ Martin Biewen, University of Mainz

2. Summary • Does increased employment risk make young Spaniards stay longer with their parents? • Idea: measure employment risk by type of labour contract (temporary vs. permanent) • Problem: potential endogeneity of contract type • Solution: seek exogenuous variation driving contract type: 1) legal time limits 2) subsidization • IV-estimates: no or only weak causal effects of employment risk on decision to leave nest

3. Comments: 1) General • Relevant and interesting question • Paper makes serious effort to identify causal effect • Use of different samples and models • Results interesting because they are unexpected

4. Comments: 2) LATE • IV-estimate is local average treatment effect • Effect only refers to individuals who change contract type as a consequence of changes of the IV • These individuals are not necessarily representative • Legal time limits: those individuals who don‘t find permanent employment before 3 years limit (the less able, less motivated, less emancipated?) • Subsidization: those individuals who wouldn‘t have found permanent employment if subsidization had been lower (the less able, less motivated, less emancipated?)

5. Comments: 3) Flows approach • Flows approach (= quarterly transitions) doesn‘t seem to contain much information • Incidence of contract changes in sample of individuals with temporary contracts only 2.2 % (!tiny „treatment“ group) • Only a fraction of these will change type due to IV • Looking at the coincidence of contract change and moving out in the same quarter seems restrictive • Flows sample only looks at individuals who start with temporary contract (representative?, efficiency?) • !stocks approach much better

6. Comments: 4) Data limitations • Provide more info on data in paper • Rotating Panel: each individual observed for „five quarters“ only (p. 13)? In addition: attrition? • Potential Tenure variable: Biographic info? Yearly measure? Sequences of temporary jobs? • Subsidies variable: firm specific? (if so: potentially correlated with unobserved individual characteristics) • Provide more info on incidence of different tempo-rary contracts (one type of contract has a 2 years time limit and one type disappears in´97)

7. Comments: 5) Specific points • If 70% of individuals between 18 and 35 year still live with parents ! extend age range to observe when individuals actually move out • Age is important variable ! include not only linearly • Regressors „Exp“ and „Expc“ (= Exp -3) unclear (negative values, collinearity?) • Why no „stocks regressions“ in subsidies case? • Aggregate employment risk: regional unemploy-ment rate missing in time limits regressions! Better include age-specific unemployment rates

8. Comments: 5) Specific points • Difference in „employment risk“ between tem-porary and permanent jobs large enough to drive decisions? 12.5 % 2.5 %

9. Comments: 6) Alternative models • So far, paper doesn‘t exploit information about employment status • Include employment risk explicitly as regressor „Employment risk“, e.g. Probit of employment status on exogenous variables and instruments is uncorrelated with if and are exogenous

10. Comments: 7) Alternative models • Timing-of-Events approach (Abbring/V.d.Berg (2003)) • No exclusion restrictions needed • But: potential problem with anticipation of conversion Hazard of conversion to permanent contract unobserved heterogeneity potential jump in hazard after conversion Hazard of leaving parents

11. Comments: 8) Other explanations • Cultural differences (role of family)/cultural change • Longer education • Women‘s emancipation/women‘s participation in higher education • Parents richer than in the past • Underdevelopped housing markets (rented accomodation)? • … ?

12. Conclusion • Good, interesting paper with high potential • Some aspects left that warrant a closer look