HOME OR ALONE - THE COSTS OF INDEPENDENT LIVING FOR YOUTH

We explain the tendency of youth to reside outside the parental househ old and the decision to share living arrangements with unrelated perso ns. We depart from the typical demographic analysis of household forma tion by using a multiequation framework, by addressing sample truncati on bias, and by testing for whether marriage and childbearing are endo genous decisions. Household formation should depend on the cost of ind ependent living and the individual's ability to pay that cost. We focu s on the role of spatially varying rental costs and use Australian dat a to test our hypotheses. We find that the cost of shelter influences the decision to reside in a group or alone. We also find that an indiv idual's earnings' capacity significantly impacts both the decision to reside separately from others and the decision to reside outside the p arental household. The greatest influence on household formation deriv es from the impact of marriage and childbearing. The effects of these factors on the decision to reside separately from others have been und erestimated in past work that does not account for sample truncation. (C) 1997 Academic Press.