Strategic non-marital cohabitation: theory and empirical implications

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.