Cohabitation, Child Development, and College Costs

Adamopoulou, Effrosyni; Hannusch, Anne; Kopecky, Karen A.; Obermeier, Tim

doi:10.21034/iwp.122

Working Paper

Cohabitation, Child Development, and College Costs

Abstract: US college-educated couples with children marry at higher rates than those without a college degree. We argue that marriage, which entails lower separation risk and more equitable asset division if separation occurs, provides insurance to the lower-earning spouse, facilitating child investment. Investing in children is more valuable for college-educated couples, who are more likely to send their children to college. Using an OLG model of marriage, cohabitation, wealth accumulation, and educational investments where college is costly and completion is risky, we find that high college costs reduce incentives to marry among couples without a college degree. These differences in union choice by education heighten differences in children’s educational attainment and reduce intergenerational mobility.

JEL Classification: J22; E24; D15; J24; J12;

https://doi.org/10.21034/iwp.122