Abstract
Non-marital cohabitation is a rapidly growing global phenomenon. Prior literature examines the puzzling empirical regularity that premarital cohabitation is associated with higher divorce rates. Since cohabitation should yield improved match-quality information, one might expect the opposite. This result, and its recent weakening, have been explored empirically and produced theoretically using matching models. In this paper, we develop an intra-household bargaining model of alternative dating and cohabitation paths to marriage in which higher relationship exit costs for cohabitors relative to daters generates the observed higher divorce rate. We also show that asymmetric exit costs can produce rejection and generate exits that would not otherwise occur. In addition, we show that even when cohabitors have lower average marriage quality, expected utility for a given match quality is higher, and some utility enhancing marriages that would not have taken place without cohabitation will occur in its presence.
Similar content being viewed by others
Notes
Cherlin et al. (2013) provide an excellent overview of the effect of the great recession on family structure in the USA, including comparison with the great depression. The 2010 Census “white-paper” on cohabitation also focuses on the effect of recent business cycles: http://www.census.gov/population/www/socdemo/Inc-Opp-sex-2009-to-2010.pdf
We note that anticipated marriage exit costs will be embedded in the marriage payoff and therefore implicitly held constant. Though the ordinal rank of dating, cohabitation, and marriage exit costs are clear, changes relative to each other are less so. When a spouse has access to health insurance through the other’s work, loss of this benefit may be wedge between marriage and cohabitation exit costs. It may be tempting to dismiss exit costs from dating relationships as trivial, but the authors do not make this assumption. For example, the dense and extensive social networks of social media have non-obvious effect on dating exit costs.
A Google search of “costs of leaving cohabitation” yielded thousands of relevant pages, including numerous free “Nonmarital Cohabitation Agreements” and many thousands of pages of financial and legal advice on how to avoid entangling assets. Typical are the following: http://www.legalzoom.com/legalforms/Cohabitation-Agreement.html
Alm and Whittington (2003) empirically explore the tax consequences of marital versus non-marital cohabitation in the USA.
While nothing specific triggers the first offer, we are simply modeling the point at which the conversation regarding the future begins. At this point, both will have a chance to express their preferences regarding cohabitation versus continuing to date or simply exiting.
The ordering here is unimportant and is presented for completeness. The assumption is simply that one of the players suggests (C) and is met with agreement or not. This could theoretically be collapsed into a joint decision and not modeled as a game between players, but modeling players separately allows us to capture the cost of rejection for the player whose preferred relationship may be rejected. The authors believe that the availability of cohabitation as a viable option creates the possibility of discord and exit from a relationship that may not have otherwise occurred, and as a result, we chose to explicitly model this. Note also that either is also given the option to exit.
Rejection costs in the C and D branches could be different but this complicates without enriching.
Chiappori and Weiss (2006) provide a general equilibrium treatment of divorce and remarriage.
10 Drawing a normal distribution for illustrative purposes is arbitrary; symmetry of the f(q) distribution is a sufficient condition for our assumptions to hold, but not necessary.
As a reminder, this setup informally models the phase in a relationship when decisions regarding the future are being made, but they do not simply arise out of the blue. We assume that conversations are ongoing which is why players have knowledge of the other’s preferences. So, when formal offers are made in our game, they will be made to efficiently avoid rejection costs, and the end result (regardless of which player is named 1 or 2) will be E if either prefers exit, D if neither prefers exit and both do not prefer C, and C if both prefer it. However, we believe it is important to illustrate the strategic play between players since players can affect the outcome with their play. For example, player 1 might suggest C even if player 2 prefers dating, but they may prefer staying together over exit, thereby giving player 1 an advantage in making the suggestion. Moreover, prior to the full revelation of knowledge, they may fear making the suggestion due to rejection costs even though both players may prefer escalation.
Given that the game is one with complete information and is sequential, at each stage, there is one best strategy with the possibility of indifference for very specific parameters. However, our analysis is not about one single equilibrium outcome but about the comparative statics on the parameters that generate alternative equilibrium outcomes for the couple.
References
Alm J, Whittington L (2003) Shacking up or shelling out: income taxes, marriage, and cohabitation. Rev Econ Househ 1.3:169–186
Becker GS (1973) A theory of marriage: part I. J Polit Econ 81(4):813–846
Becker GS (1991) A treatise on the family. Harvard University Press, Cambridge
Becker GS, Landes E, Michael R (1977) An economic analysis of marital instability. J Polit Econ 85(6):1141–1187
Bennett N, Blanc A, Bloom D (1988) Commitment and the modern union: assessing the link between premarital cohabitation and subsequent marital stability. Am Sociol Rev 53(1):127–138
Brien M, Lillard L, Stern S (2006) Cohabitation, Marriage, and divorce in a model of match quality. Int Econ Rev 47(2):451–494
Brown S, Booth A (1996) Cohabitation versus marriage: a comparison of relationship quality. J Marriage Fam 58(3):668–678
Brown S, Manning W (2009) Family boundary ambiguity and the measurement of family structure: the significance of cohabitation. Demogr 46(1)
Burdett K, Coles M (1997) Marriage and class. Q J Econ 112:141–168
Bütikofer A, Gerfin M (2009) The economies of scale of living together and how they are shared: Estimates Based on a Collective Household Model. IZA Discussion Paper No. University of Bern. July
Cherlin A, Cumberworth E, Morgan S, Wimer C (2013) The effects of the great recession on family structure and fertility. ANNALS Am Acad Polit Soc Sci 650(1):214–231
Chiappori P, Oreffice S, Quintana-Domeque C (2012) Fatter attraction: anthropometric and socioeconomic matching on the marriage market. J Polit Econ 120(4):659–695
Chiappori P, Iyigun M, Lafortune J, Weiss Y (2011) Are intra-household allocations policy neutral? A theory and some evidence. IZA Discussion Paper No. 5594. Available at SSRN: http://ssrn.com/abstract=1796589
Chiappori P, Weiss Y (2006) Divorce, remarriage, and welfare: a general equilibrium approach. J Eur Econ Assoc 4:415–426
Cigno A (2012) Marriage as a commitment device. Rev Econ Househ 10(2):193–213
Diamond P (1982) Aggregate demand management in search equilibrium. J Polit Econ 90(5):881–894
Farmer A, Horowitz A (2004) The engagement game. J Popul Econ 17:627–644
Hayford S, Morgan P (2008) The quality of retrospective data on cohabitation. Demography 45(1):129–141
Heuveline P, Timberlake J (2004) The role of cohabitation in family formation: the United States in comparative perspective. J Marriage Fam 66(5):1214–1230
Hewitt B, De Vaus D (2009) Change in the association between premarital cohabitation and separation, Australia 1945–2000. J Marriage Fam 71(2):353–361
Hitsch G, Hortaçsu A, Ariely D (2010) Matching and sorting in online dating. Am Econ Rev 100(1):130–163
Javanovic B (1979) Job matching and the theory of turnover. J Polit Econ 87(5):972–990
Jay M (2012) The downside of cohabiting before marriage. The New York Times 14 April 2013. http://www.nytimes.com/2012/04/15/opinion/Sunday/the-downside-of-cohabiting-beforemarriage.html?pagewanted=all&_r=0. Accessed 14 April 2013
Kamp Dush C, Cohan C, Amato P (2003) The Relationship between cohabitation and marital quality and stability: change across cohorts J Marriage Fam 65(3):539–49
Lundberg S, Pollak R (1996) Bargaining and distribution in marriage. J Econ Perspect 10(4):139–58
Lundberg S, Pollak R (2007) The American family and family economics. J Econ Perspect 21(2):3–26
McElroy M, Horney MJ (1981) Nash-bargained household decisions: towards a generalization of the theory of demand. Int Econ Rev 22(2):333–349
Matouschek N, Rasul I (2008) The economics of the marriage contract: theories and evidence. J Law Econ 51:59–110
Mortensen D (1982) The matching process as a noncooperative bargaining game. In: McCall J (ed) The Economics of Information and Uncertainty. University of Chicago Press, Chicago
Mortensen D (1988) Matching: finding a partner for life or otherwise. Am J Sociol 94:S215—S40
Mortensen D (1986) Models of Search in the Labor Market. Handbook of Labor Economics
Nordblom K (2004) Cohabitation and marriage in a risky world. Rev Econ Househ 2:325–340
Rangel M (2006) Alimony rights and intrahousehold allocation of Resources. Econ J 116:627–658
Reinhold S (2010) Reassessing the link between premarital cohabitation and marital instability. Demography 47(3):719–733
Sahib PR, Gu X (2002) ’Living in sin’ and marriage: a matching model. J Popul Econ 15:261–282
Stevenson B, Wolfers J (2007) Marriage and divorce: changes and their driving forces. J Econ Perspect 21(2):27–52
Tuttle B (2013) More young couples commit—to homeownership before marriage. Time Magazine–Money & Business. http://business.time.com/2013/04/17/more-young-couples-commit-to-homeownership-before-marriage/#ixzz2heYRXurk
Kreider R (2010) Increase in opposite-sex cohabitating couples from 2009 to 2010 in the annual social and economic supplement to the current population survey. U.S. Census Department. http://www.census.gov/population/www/socdemo/Inc-Opp-sex-2009-to-2010.pdf
Weiss Y, Willis R (1997) Match quality, new information, and marital dissolution. J Labor Econ 15(1):S293–S329
Wirl F, Feichtinger G (2002) Intrafamiliar consumption and saving under altruism and wealth considerations. Econ 69:93–111
Acknowledgments
We thank two anonymous referees and the editor for insightful and constructive suggestions and critiques. We also thank Aaron Johnson for exceptional research assistance with this project. Helpful comments by Jungmin Lee, Daniel Hamermesh, André Portela Souza, and Bill Curington are appreciated. The usual disclaimers apply
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Alessandro Cigno
Rights and permissions
About this article
Cite this article
Farmer, A., Horowitz, A.W. Strategic non-marital cohabitation: theory and empirical implications. J Popul Econ 28, 219–237 (2015). https://doi.org/10.1007/s00148-014-0517-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00148-014-0517-9