In most European countries, poor cohabiting adults are eligible to lower per capita social assistance benefits than single adults, as they are supposed to benefit from economies of scale in household expenses as renting, 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 suggests that higher benefits for cohabitants decrease the number of poor one-person households significantly. We discuss the consequences of this result on government expenditures, estimate the net cost of marginally increasing benefits for cohabitants and touch upon externalities that strengthen the case for higher cohabitant benefits in countries with strongly differentiated rates.
