An economic model of cohabitation and divorce

The positive correlation between the rates of cohabitation and divorce has long been established. This paper seeks to determine the direction of causa tion between these two variables. A simultaneous equations model is specifi ed with cohabitation and divorce rates as endogenous variables and using da ta aggregated to the state level for 1990. This procedure suggests that the divorce rate is a significant factor in ex plaining variations across states in the cohabitation rate, and that the di vorce rate is itself influenced by cohabitation behavior. This finding strengthens the results put forth by various economic and soci ological single equation studies. This synthesis of information and data pr ovided by sociologists with economic theory and methodology, suggests furth er research in modelling demographic variables as joint outcomes of the sam e process. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classifi cation: D1; J12.