THE ECONOMICS OF COHABITATION

Union formation behavior has undergone vast changes over the past 25 y ears in virtually all Western countries. Key components-of the change have been the increase in cohabitational unions and the decline in the marriage rate. Although this has important implications for both hous ehold and market production activities, no previous economic studies h ave focused explicitly on cohabitation. This paper develops an economi c model of cohabitational demand based on the standard theory of consu mer choice. Regression analysis of United States' data aggregated at t he state level provides support for this economic model. Specifically, it suggests that the increased labor force participation of women has generated a higher level of demand for the greater flexibility offere d by cohabitational unions relative to formal marriage.