The Consequences of Extending Equitable Property Division Divorce Laws to Cohabitants

Abstract

Since the 1970s, marriage rates have declined throughout the developed world and unmarried cohabitation has become increasingly important. Despite the growing importance, unmarried couples face a wide range of legal frameworks if their relationship breaks down. For example, in many US states and in England and Wales family law does not cover unmarried couples. In contrast, in Australia, New Zealand, and parts of Canada, unmarried couples face the same property division regime as married couples. We examine the effects of the extension of the Australian Family Law Act to unmarried couples, focusing on how being subject to equitable property division laws affects the behaviour of intact couples. Before 2009, laws determining post-separation financial settlements for unmarried couples varied between states and territories, ranging from marriage-equivalence to far more restrictive provisions. In 2008, the provisions of the Family Law Act 1975 (Cth) were extended to unmarried couples, harmonizing the legal regime across the country with effect from 1 March 2009. We use this natural experiment to identify the causal effect of being subject to marriage-equivalent equitable property division laws. We find that existing couples are more likely to make relationship-specific investments after being exposed to laws enabling the equitable redistribution of property in the event of relationship breakdown. In affected couples we find that men increase their employment and women increase time spent on housework. Couples have more children and are more likely to become home owners. When examining self-reported life satisfaction, we find similar effects for men and women, with an increase in financial satisfaction offset by a reduction in partner satisfaction. These results demonstrate the causal effect of property division laws on relationshipspecific investments and demonstrate that legal approaches aimed at sharing the financial burden of relationship breakdown can have important incentive effects for existing couples. This means that a potentially unintended consequence of these laws is that they make unmarried couples behave more like married couples.

Separation and Elevated Residential Mobility: A Cross-Country Comparison

“…However, in Australia, unmarried couples have the same post-separation rights to property as divorced couples (Chigavazira et al 2019).…”

More or Less Unmarried. The Impact of Legal Settings of Cohabitation on Labour Market Outcomes

“…In Canada, Chiappori, Iyigun, Lafortune, and Weiss (2017) find that the introduction of alimony laws for unmarried cohabiting couples increases men labour force participation and decreases women participation for existing couples at the time of the reform. In Australia, Chigavazira, Fisher, Robinson, and Zhu (2019) show that cohabiting couples are more likely to make relationship-specific investment after being exposed to laws that make them equal to married couples. To our knowledge, we are the first paper that estimates in a unified framework the separate effects of alimony and equal property division at separation for cohabiting couples.…”

Collateralized Marriage

“…While many authors have explored the reasons for declining marriage rates, and accompanying increases in non-marital fertility(Akerlof et al, 1996;Mechoulan, 2011;Duncan and Hoffman, 1990;Rosenzweig, 1999;Nechyba, 2001;Neal, 2004), ours is the first to explore the role of assets in substituting for other legal protections. We also relate to literature looking at the strengthening of non-marital contracting, including child support enforcement in the US(Aizer and McLanahan, 2005; Tannenbaum, 2015;Rossin-Slater, 2017;Brown et al, 2015), common law marriage(Grossbard andVernon, 2015, 2014), and protections for cohabitants in other countries(Chiappori et al, 2017b;Chigavazira et al, 2019).4 In this way, our model is unique from literature that has framed women's labor supply as reflecting bargaining power to spend time on leisure (e.g.,Chiappori et al, 2002;Voena, 2015; and Chiappori and Oreffice, 2008) by emphasizing the productive value of time away from work for creating household public goods.5 This is an application of the general result that limited commitment reduces risk-sharing between agents, seeKocherlakota (1996).6 The positive role of a "storage" technology was discussed in the more general problem of limited commitment by ÁrpádÁbrahám and Laczó (2018).7 If offered the choice, the couple will always prefer to save in this "high commitment device," since it moves them closer to the full-commitment optimum. In fact even if the decision were in the hands of the husband, he would choose to save in the vehicle with stronger commitment as long as he values child quality sufficiently highly relative to second-period consumption.…”