Non-Technical Summary:
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 relationship-specific 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.