The effect of property division laws on divorce and labor supply: evidence from Spain

I study how the relative bargaining position of spouses affects the incidence of marital dissolution and the labor supply decision of intact couples. I identify exogenous variation in bargaining position within the household by exploiting a natural experiment in Spain where different regions have different rules to divide marital property in case of divorce. I benefit from two law changes to the separation of property regime in Catalonia, with opposite expected effects on the bargaining position of spouses. I found that a reform that unexpectedly improved the position of the wife within the marriage increased the divorce rate in around 13 percent in the short run, and although this effect seemed to dissipate over time, it remained positive one decade afterwards. For intact couples, I find that the same reform caused a reduction in female labor supply of between 0.6 and 2.5 hours per week, and also a reduction in their probability of employment of 2 percent. Moreover, when the previous improvement in wives' bargaining position was undone by a reform to the scope of marital contracts, female labor supply reacted in the opposite way, with an increase in hours worked and the probability of employment.