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Financial implications of relationship breakdown: Does marriage matter?

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Abstract

In raw data in the UK, the income loss on separation for women who were cohabiting is less than the loss for those who were married. Cohabitants lose less even after controlling for observable characteristics including age and the number of children. This difference is not explained by differences in access to benefits or labor supply responses after separation. In contrast, there is no difference in the change in household income experienced by cohabiting and married men who do better on average than both groups of women. We show that the difference for women arises because of differences in the use of family support networks: cohabitants’ standard of living falls by less because they are more likely to live with other adults, particularly their family, following separation, even after controlling for age and children. Divorced women do not return to living with their extended families. The greater legal protection offered by marriage does not appear to translate into economic protection.

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Notes

  1. We use the term “cohabitation” to refer to a cohabiting relationship where the individuals act as if married but are not in fact married. We use the term “separation” to refer to the ending of either type of relationship, then specifically “divorce” to refer to the end of a marriage.

  2. In Scotland, the law changed in 2009 to allow some protection for cohabitants under family law. It is not clear yet whether this has changed substantially the cost of separating from cohabitation. Other countries, such as Canada and Australia, confer similar protections on cohabitants after a given length of time.

  3. There is also substantial evidence that the income losses experienced by women after separating are larger than those experienced by men (see Duncan and Hoffman 1985; Bianchi et al. 1999; McManus and DiPrete 2001; McKeever and Wolfinger 2002; Gray and Chapman 2007; Gadalla 2009; Uunk 2004; Aassve et al. 2007; Jenkins 2009; Fisher and Low 2009). Most of these studies do not distinguish between marriage and cohabitation.

  4. The incidence of ongoing spousal maintenance payments (the English legal term for alimony) is very low in the BHPS, which matches findings in Miles and Probert (2009).

  5. The value of \(\kappa ^r\) may include health effects of being in a relationship, as documented by Averett et al. (2013), and may differ across relationship types.

  6. Adjustments to the division of household resources are limited to the extent that utility is transferable. Separation therefore occurs either when there is no surplus or when one partner is not able to transfer utility to compensate the other for remaining in the relationship.

  7. In 2006, the House of Lords ruling on Miller and McFarlane changed the basis of financial protection on divorce, although there is uncertainty about how much this change was enforced and so we end our data period in 2005.

  8. Separations from marriage are said to occur when an individual changes their status from ‘married’ to either ‘separated’, ‘divorced’ or ‘living with someone’. We disregard partnerships that have ended through the death of a partner. Separations from cohabitation occur when an individual changes their status from ‘living with someone’ to ‘never married’, ‘separated’ or ‘divorced’, or their status remains ‘living with someone’ but the identity of that partner changes. In addition, we exclude any separations where the spouse’s identity is not recorded as changing over the separation time.

  9. We do not require the separating partnership to have children, in contrast with Jenkins (2009).

  10. Of the 100 women who separate twice, 41 experience two cohabitations, 17 two marriages and the remainder one marriage and one cohabitation. Six women separate from three cohabitations, seven from two cohabitations and one marriage, and three from two marriages and one cohabitation. One woman separates from four cohabitations, and one from two cohabitations and two marriages.

  11. In all cases at least one member of the separating couple must respond at time \(t=0\), otherwise we do not know if a couple has separated and attritted, or just attritted.

  12. That is, they never respond to questions regarding individual characteristics, so we are limited to information at the household level.

  13. If this were not the case and, for example, a woman had a less than 50 % share of household income before separation, they may actually improve their income on separation. We would need to consider bargaining within the household to allow for this (see, for example, Manser and Brown 1980). Moreover, Grossbard-Shechtman (1993) argues that a cohabitant’s bargaining power is lower than a spouse’s bargaining power resulting in a cohabitant having a lower share of household income than a married woman. This hypothesis is consistent with Mukhopadhyay (2008).

  14. The data does not distinguish between the source of transfers, so it is not possible to examine the amount of any transfer from a former partner, just whether any transfer from a former partner is reported. Furthermore, reports of receiving spousal maintenance payments may also include the receipt of child support.

  15. As discussed above, the panel is unbalanced and there is attrition of the sample post-separation. The numbers in the figure are the raw averages across all observations for that “time since separation.”

  16. The presence of an infant and relationship length are the strongest predictors of marital status in our sample. We included other interactions with the cohabitation dummy, but these had negligible effect on the magnitude of the cohabitation indicator coefficient. An alternative approach to examining this heterogeneity is to use propensity score matching techniques, which typically assign equal weight to each ‘treated’ observation. Results from kernel density matching and stratified matching using the control variables for the propensity score are similar to the headline coefficients on the cohabitation indicator, reflecting that the cohabiting women in our sample tend not to have a young child and are in shorter relationships on average. These matching results are available on request.

  17. These results are robust to including indicator variables for the eight major groups of the 1990 Standard Occupational Classification.

  18. However, the sample size becomes very small when we split the data further and so it is hard to make statistical statements about differential effects at this level.

  19. These results are reported in Appendix Table 15. Results for different equivalization scales are available on request.

  20. Including indicators for whether the woman’s mother and father are alive (as reported in wave 11), and an indicator for whether the woman was born outside of the UK, in the regressions in Table 8 does not change the results.

  21. This includes shopping, childcare, housework and financial help.

  22. There may also be differences between cohabitants and married couples in income sharing prior to separation, as discussed above.

  23. Robustness checks for different equivalization scales as well as comparable propensity score matching results are available on request.

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Acknowledgments

We thank Tom Crossley, Shoshana Grossbard, Pramila Krishnan, Jo Miles and two anonymous referees for helpful comments. Fisher acknowledges the support of the Australian Research Council Discovery Project (DP150101718) and Australian Research Council Centre of Excellence for Children and Families over the Life Course (CE140100027). The Centre is administered by the Institute for Social Science Research at The University of Queensland, with nodes at The University of Western Australia, The University of Melbourne and The University of Sydney. The views expressed in this paper are not necessarily those of the Australian Research Council. Low thanks funding from the ESRC as a Research Fellow, grant number RES-063-27-0211.

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Correspondence to Hamish Low.

Appendix

Appendix

See Tables 1112131415, and 16.

Table 11 Summary statistics before breakdown, by attrition and follow status
Table 12 Predictors of attrition
Table 13 Robustness: change in equivalized household income
Table 14 Change in women’s log absolute household income on separation: by number of children
Table 15 Change in men’s log household income on separation
Table 16 Relationship between cohabitation and contact with parents: women

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Fisher, H., Low, H. Financial implications of relationship breakdown: Does marriage matter?. Rev Econ Household 13, 735–769 (2015). https://doi.org/10.1007/s11150-015-9292-y

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