Divorce Property Division and the Decision to Marry or Cohabit

Working Paper
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Fisher, H. 

This paper presents a model of the choice between marriage and cohabitation for a couple who have decided to form a relationship. The model is used to analyse the implications of changing from a title based division of property on divorce to an equal sharing regime. There are two opposing effects. In line with popular expectations, the change to an equal sharing regime prevents some wealthy individuals from marrying since they risk losing half of their assets in the event of divorce. Offsetting this, the equal sharing property division regime enables cooperative investments to be made in marriage, and so increases the value of marriage relative to cohabitation for some couples. Overall the impact on the marriage rate is ambiguous, although the rate is most likely to increase where it is more difficult to make cooperative investments due to unilateral divorce laws, and where couples are more similar to each other, reducing their cost of divorce.

Multisectors, Technology shocks, Business cycles, Long-run restrictions, Cross Sectional Dependence
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