Living arrangements in Western Europe: Does cultural origin matter?

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 interpretation 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 United States, both in 1970 and 2000. 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. (JEL: D1, J1, Z13).