Divorce law and house prices in Europe (with Rafael González-Val)
Abstract: This study examines the static and dynamic effect on house prices of law reforms that facilitate divorce. Divorce law reforms can increase the demand for housing and, thus, affect prices because of the need for the parties to live in separate housing after divorce. To explore this, we collected detailed information on the historical variations in divorce laws in ten European countries between 1960 and 2008, which we merged with data from the annual real house price index developed by Knoll et al. (2017). The divorce law reforms considered in this study provide a quasi-experimental setting due to the differences in the timing of their entry into force across countries and because the reforms do not aim to regulate the housing market but only to allow couples to easily end their marriages. We find that divorce law reforms accounted for a sizable 22% of the average interannual increment in the real house price index, at least, three to six years after the reforms. This short-term non-negligible impact proved robust to identification checks and to the inclusion of time-variant and invariant controls.