European Center for Advanced Research in Economics and Statistics

Title: Marital Decline: The Role of House Prices and Parental Coresidence

Abstract: Over the past 40 years in the U.S., marriage rates havedeclined significantly while parental coresidence among young adults hasincreased sharply, especially among the non-college educated. At the same time, rising house prices have outpacedincome growth, decreasing housing affordability. This paper analyzes how theserising prices influence coresidence and marriage decisions. I first present astylized model illustrating the dual impact of higher house prices: theyencourage marriage due to economies of scale but also lead to more individualsliving with parents, decreasing their participation in the marriage market.Then, I develop a quantitative life-cycle model of household formation(marriage and divorce) and housing choices (coresidence, renting, and buying).The model economy is characterized by equilibrium in the marriage and housingmarkets and is calibrated to the 2019 U.S. economy. I use the model for twoexercises. First, I quantify the role of house prices on the marital declinebetween 1980 and 2019. I find that house prices explain around 30% of thedecline in marriage. Additionally, the model can account for the larger drop inmarriage among the non-college educated. Second, I evaluate the effect ofhousing policies and find that a 10% rental subsidy financed by higher taxescan reduce parental coresidence among young adults by 3.3 percentage points,and increase their marriage rates by 1.5 percentage points.