Living Alone or Together: Effect of Social Benefits

Abstract

Abstract In most European countries, poor cohabiting adults are eligible to lower per capita social assistance benefits than poor adults living alone, as they are supposed to benefit from economies of scale in household expenses as housing, heating costs, etc. In this paper, we show that this aspect of social assistance varies strongly within Europe and use this variation to identify a possible causality of social assistance scheme parameters on cohabitation decisions. Our statistical analysis, that focuses on childless adults, suggests that high benefits for cohabitants decrease the number of poor one-person households significantly. We then discuss how this result affects government expenses on social assistance and the related policy implications. Lastly, we estimate the marginal cost of marginally increasing the benefits for cohabitants in the different European countries, and show that it is close to zero for some countries with strongly differentiated rates and a low initial share of cohabitants among the socially assisted. JEL: J12, J18