Abstract
The 2008 alimony reform in Germany considerably reduced post-marital and caregiver alimony. We analyze how individuals adapted to these changed rulings in terms of labor supply, the intra-household allocation of leisure, and marital stability. We use the German Socio-Economic Panel (SOEP) and conduct a difference-in-difference analysis to investigate couples’ behavioral responses to the reform. In general, the results do not confirm theoretical expectations from labor supply and household bargaining models. In particular, we do not find evidence that women increase their labor supply as a result of the negative expected income effect. Neither do our results reveal that leisure is shifted from women to men as a response to the changed bargaining positions. We find some evidence that married couples are more likely to separate after the reform, but this effect vanishes once unobserved heterogeneity at the couple level is controlled for.
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Notes
With no-fault divorce, a marriage can be dissolved even if neither spouse can be blamed for the breakdown of marriage, e.g., because of having committed adultery. Many countries even have been accepting this ‘irretrievable breakdown of marriage’ as a reason for divorce if it is put forward by only one spouse. These legal schemes are then classified as ‘unilateral divorce’ regimes, as opposed to ‘consent’ (also called ‘bilateral’ or ‘mutual divorce’).
While the law does not define this short duration in years, legal practice has set it to between two and three years (Bundesgerichtshof 1986).
This is a frequent case according to Borth (2007).
See Table 8 for a comparison of the old and new rulings.
Again, the law does not define this duration in years. Legal practice used to apply a threshold of around 10 years (Born et al. 2012: Sec. 1609, margin number 21).
For a change to be considerable, the expected change in alimony payments has to be approximately 10% (Gruber 2013, S. 113).
The validity of the theorem is based on the assumptions of transferable utility and low bargaining or transaction costs. Moreover, as Rangel (2006) argues, the threat of ending the relationship has to be sufficiently credible, which he expects to be the case rather for unmarried than married couples. Otherwise, the change of the threat point would not need to affect the bargaining process. A more detailed discussion of the Becker–Coase theorem and its assumptions is included in Chiappori et al. (2009, 2015).
If one partner’s leisure time increases (decreases), either his/her housework time or his/her working time has to decrease (increase). Hence, the changed bargaining position can also affect the partner’s labor supply.
We have also used overall labor supply, i.e., working hours unconditional on labor force participation, as an alternative outcome. In addition, following Rangel (2006) and Chiappori et al. (2017), we have used the logarithm of daily working hours as well as transitions from part-time to full-time employment as alternative measures for responses at the intensive margin of labor supply. The results are similar to those on working hours conditional on labor force participation and therefore not shown here
Determining the duration of the post- and the pre-reform period is of course to some extent arbitrary. We decided to include several years before and after the reform to be able to control for general time trends and to not let outcomes of a single year determine the results. We also check the robustness of our results by adding one and two further years to each of the pre- and post-reform period (see Section 4.3).
Pre-treatment trends for all outcome variables are shown in Fig. 1.
On 1 January 2007, a new parental leave benefit called Elterngeld (‘parental money’) replaced a previous benefit called Erziehungsgeld (‘child-raising money’). Whereas the previous benefit was specifically targeted towards low-income families, the new Elterngeld is a much more generous transfer, which depends on parental labor earnings in the pre-birth period (see Kluve and Tamm (2013) for a more extensive discussion of the new parental leave regulation).
A detailed documentation of the SOEP data, data collection, sample composition, and representativeness can be found in Wagner et al. (2007). A description of version 31.1 of the dataset, which is the version we use, is available at https://doi.org/10.5684/soep.v31.
Labor force participation is a binary variable equal to one for persons who are working, are on leave or are unemployed, and equal to zero for the remaining, who are not working and are not registered as searching for work. It is set to missing for persons who already have retired.
Note that post-hoc power calculations reveal that the number of observations in our study is large enough to detect effect sizes found in previous studies.
Note that in the FE regression, identification of the treatment effect only comes from couples who are observed both before and after the reform, which means that results are conditional on the couple staying together until the reform.
The wage regressions estimate the logarithm of gross monthly earnings as a function of age and its square, labor market experience and its square, a set of indicator variables for the highest degree of education, federal state fixed effects as well as year fixed effects.
Of course, by including parents with young children or parents without children in the comparisons group, the composition of this group could be influenced by potential reform effects on (in-wedlock vs. out-of-wedlock) fertility. However, excluding parents with young or without children would result in a too small sample size.
The two groups are built on the basis of men’s average pre-reform satisfaction with their family life in the years 2006–2007 (as the variable is not available for 2005).
Except for men’s labor force participation, the pre-trends for married and single individuals follow parallel trends for all outcomes.
Of course, given that about one third of all marriages get divorced in Germany (Statistisches Bundesamt 2016), this would imply that people are to some extent myopic and do not fully consider the risk of divorce when making decisions about labor supply and the intra-household division of labor.
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Acknowledgements
The authors are grateful to the editors, Shoshana Grossbard and Tansel Yilmazer, two anonymous reviewers, Thomas Bauer, Christina Gathmann, and participants at the BeNa internal workshop 2015, the 9th RGS Doctoral Conference, the 2016 Annual Conference of the Verein für Socialpolitik and the 28th Annual Conference of the European Association of Labour Economists for valuable comments and suggestions.
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Bredtmann, J., Vonnahme, C. Less money after divorce – how the 2008 alimony reform in Germany affected spouses’ labor supply, leisure and marital stability. Rev Econ Household 17, 1191–1223 (2019). https://doi.org/10.1007/s11150-019-09448-z
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DOI: https://doi.org/10.1007/s11150-019-09448-z