Pooling of Wealth in Marriage: The Role of Premarital Cohabitation

Abstract

Previous studies documented the existence of a ‘cohabitation–marriage gap’ in resource pooling among opposite-sex partners, with cohabiters being more likely to separate income and wealth than married individuals. Surprisingly, despite many non-marital cohabitations transform into marriages, we know little about income and wealth pooling of ‘spousal cohabiters’, i.e. spouses who transition to marriage after experiencing a period of non-marital cohabitation. The comparison between ‘spousal cohabiters’ and directly married spouses is particularly interesting because it offers a litmus test of theories of marriage in relation to how and why economic resources are differently distributed within married vs. cohabiting couples. This paper compares directly married couples and ‘spousal cohabiters’ in Italy, focusing on one aspect of resource pooling: the marital property regime, i.e. the choice made at the time of marriage between joint or separate ownership of wealth accumulated during marriage. Competing hypotheses are developed on the basis of the arguments that marriage yields legal protection, that selection mechanisms drive both the choice of community vs. separation of property and direct marriage vs. premarital cohabitation, and that, by inertia, ‘spousal cohabiters’ continue to separate resources upon transition to marriage. Results based on the 2016 Italian ‘Family and social subjects’ survey show that ‘spousal cohabiters’ are significantly more likely to choose separation of property compared to directly married spouses. Such differences, however, are drastically reduced once relevant confounders are controlled for, hence suggesting that existing differences between directly married and previously cohabiting couples and, more generally, differences between married and cohabiting couples are driven, above all, by selection mechanisms.

Cohabiting Couples: A Neglected Family Form that is Important for the Field of Family Business

“…Married couples are more likely to share resources (Larson, 2001;Vitali & Fraboni, 2022) Relationships (interaction)…”

“…Married couples share more financial resources than do cohabiting couples (Vitali & Fraboni, 2022) Wealth Married couples are wealthier than cohabiting couples (Hastings & Schneider, 2021;Kapelle & Lersch, 2020) Inheritance rights Married couples may find it easier to transfer assets to the next generation since their children have legal inheritance rights 2 While Table 1 describes the differences between cohabiting and married couples along several dimensions, the theories that provide explanations for these differences can be found in: 1) Human capital theory, e.g., Becker (1993); 2) Social Capital theory, e.g., Nahapiet & Ghoshal (1998) and Pearson et al (2008); 3) Transaction Cost theory, e.g., Pollak (1985) and Williamson (2013); 4) Theories pertaining to marriage and family structure, e.g., Coontz (2006) and Cherlin (2010).…”

“…Cohabitors tend to have fewer shared interests and objectives than married couples. For example, cohabiting couples are less likely to pool their resources and work together to meet financial or career goals (Larson, 2001;Vitali & Fraboni, 2022). Accordingly, cohabiting couples may be more prone to act as individuals than married couples.…”

Wealth Accumulation and the Gender Wealth Gap Across Couples’ Legal Statuses and Matrimonial Property Regimes in France

“…Signing a prenuptial contract is becoming increasingly common in France, with roughly 20% of French newlywed couples having opted out of the default property regime in the 2010s (Frémeaux & Leturcq, 2018). Little is known regarding the prevalence of prenuptial agreements in other European countries-with the notable exception of Italy, where it has been well-documented that newlywed couples massively opt out of the default property regime (community of acquisitions) and choose to separate their assets (Fraboni and Vitali, 2019;Bayot & Voena, 2015), especially couples who transition to marriage after experiencing a period of non-marital cohabitation (Vitali & Fraboni, 2022). France and Italy are comparable because community of acquisitions is the default property regime, and couples opting out of the default regime in both countries share similar traits: They are more educated, more likely to be self-employed, and more likely to be both active in the labor market.…”

Intra-Couple Wealth Inequality: What’s Socio-Demographics Got to Do with it?

“…There is evidence that spouses who first lived together and only later got married are more likely to opt for separation of property than spouses who married directly. However, the selection effects that drive some couples into premarital cohabitation overlap with those of separation of property, which diminishes the effect of premarital cohabitation on the choice of the property regime (Vitali & Fraboni, 2022 ).…”