November 2016

No. 10363: The Ant or the Grasshopper? The Long-term Consequences of Unilateral Divorce Laws on Savings of European Households

Viola Angelini, Marco Bertoni, Luca Stella, Christoph T. Weiss

By allowing people to obtain divorce without the consent of their spouse, Unilateral Divorce Laws (UDLs) increase the risk of divorce. Using the staggered introduction of UDLs across European countries, we show that households exposed to UDLs for longer time accumulate more savings. This effect holds for both financial and total wealth and is stronger at higher quantiles of the wealth distribution. Longer exposure to UDLs also increases female labour market participation and financial literacy, contributing to uncover the mechanisms through which the risk of divorce may affect savings. Our results are consistent with a precautionary motive for saving.