Do Alimony Regulations Matter Inside Marriage? Evidence from the 2008 Reform of the German Maintenance Law

Abstract

This study investigates how West German spouses have responded to the alimony reform introduced in 2008. This reform imposed financial self-responsibility after a finalized divorce. It weakened the relative bargaining position of the spouse with a claim for maintenance in the case of a potential divorce before the law change. Therefore, the present study helps to verify bargaining models by considering this policy change as a shift of spousal bargaining power. Estimating difference-in-differences models, I find that, indeed, wives who face a potential alimony loss might have increased their working hours as a result of the 2008 reform. Thus, this finding suggests that family law may affect labor market outcomes. To my knowledge, the present investigation is the first analysis of the behavioral response of individuals in longer marriages to this change in alimony law. Its approach to identifying those who have been (dis)advantaged by this reform is a new one, proposing a method that reflects the realities of alimony arrangements.