Changing the Rules Midway: The Impact of Granting Alimony Rights on Existing and Newly-Formed Partnerships∗

The paper analyzes the effect of a reform granting alimony rights to cohabiting couples in Canada, exploiting the fact that each province extended these rights in different years and required different cohabitation length. A theoretical analysis, based on a collective household model with a matching framework, predicts that changes in alimony laws would affect existing couples and couples-to-be differently. For existing couples, legislative changes aimed at favoring (wo)men do benefit them, especially if the match quality is low. However, for couples not yet formed, they generate offsetting intra-household transfers (in our model, of leisure) and lower intra-marital allocations for the spouses who are the intended beneficiary. Our empirical analysis confirms these predictions. Among cohabiting couples united long enough before the reform, obtaining the right to petition for alimony led women to lower their labor force participation. These results, however, do not hold — and, in some cases, are reversed — for newly formed cohabiting couples. ∗Carolina Gonzalez-Velosa provided very useful research assistance. We acknowledge useful comments we received in workshops at the University of Chicago, Cornell University, Université Laval, University of Sao Paulo, Universidad de Chile, Essex University and the Montreal Applied Microeconomics Workshop. Jeanne Lafortune acknowledges financial support from the SSHRC of Canada. Pierre-Andre Chiappori gratefully acknowledges financial support by the NSF Economics Award No: SES-05-32398 and Murat Iyigun thanks NSF for Human and Social Dynamics Grant No: SES-0527751. All remaining errors are our own. Corresponding author: Jeanne Lafortune, E-mail: [email protected]. †University of Maryland and Pontificia Universidad Catolica de Chile. ‡Columbia University. §University of Colorado and IZA. ¶Tel Aviv University and IZA.