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Public Goods, Transferable Utility and Divorce Laws

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  • Chiappori, Pierre-André

    ()
    (Columbia University)

  • Iyigun, Murat

    ()
    (University of Colorado, Boulder)

  • Weiss, Yoram

    ()
    (Tel Aviv University)

Abstract

We reconsider the well known Becker-Coase (BC) argument, according to which changes in divorce laws should not affect divorce rates, in the context of households which consume public goods in addition to private goods. For this result to hold, utility must be transferable both within marriage and upon divorce, and the marginal rate of substitution between public and private consumption needs to be invariant in marital status. We develop a model in which couples consume public goods and show that if divorce alters the way some goods are consumed (either because some goods that are public in marriage become private in divorce or because divorce affects the marginal rate of substitution between public and private goods), then the Becker-Coase theorem holds only under strict quasi-linearity. We conclude that, in general, divorce laws will influence the divorce rate, although the impact of a change in divorce laws can go in either direction.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2646.

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Length: 41 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2646

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Keywords: Becker-Coase theorem; collective model; divorce rates;

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References

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  1. Imran Rasul, 2006. "Marriage Markets and Divorce Laws," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 22(1), pages 30-69, April.
  2. Giulio Fella & Paola Manzini & Marco Mariotti, 2002. "Does Divorce Law Matter?," Working Papers, Queen Mary, University of London, School of Economics and Finance 454, Queen Mary, University of London, School of Economics and Finance.
  3. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
  4. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, Elsevier, vol. 130(1), pages 1-26, September.
  5. Becker, Gary S, 1992. "Fertility and the Economy," Journal of Population Economics, Springer, Springer, vol. 5(3), pages 185-201, August.
  6. Lundberg, S.J. & Pollak, R.A. & Wales, T.J., 1994. "Do Husbands and Wives Pool Their Resources? Evidence from U.K. Child Benefit," Discussion Papers in Economics at the University of Washington, Department of Economics at the University of Washington 94-6, Department of Economics at the University of Washington.
  7. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, Econometric Society, vol. 66(6), pages 1241-1278, November.
  8. Duncan Thomas, 1990. "Intra-Household Resource Allocation: An Inferential Approach," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 635-664.
  9. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
  10. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(3), pages 437-67, June.
  11. Schultz, T.P., 1990. "Testing The Neoclassical Model Of Family Labor Supply And Fertility," Papers, Yale - Economic Growth Center 601, Yale - Economic Growth Center.
  12. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, American Economic Association, vol. 96(5), pages 1802-1820, December.
  13. Pierre-André Chiappori & Yoram Weiss, 2007. "Divorce, Remarriage, and Child Support," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 25, pages 37-74.
  14. Simon Clark, 2004. "Law, Property, and Marital Dissolution," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 32, Edinburgh School of Economics, University of Edinburgh.
  15. Stevenson, Betsey & Wolfers, Justin, 2003. "Bargaining in the Shadow of the Law: Divorce Laws and Family Distress," Research Papers, Stanford University, Graduate School of Business 1828, Stanford University, Graduate School of Business.
  16. Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, American Economic Association, vol. 76(3), pages 437-54, June.
  17. Niko Matouschek & Imran Rasul, 2008. "The Economics of the Marriage Contract: Theories and Evidence," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 51(1), pages 59-110, 02.
  18. Bergstrom, Theodore C, 1999. " Systems of Benevolent Utility Functions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 71-100.
  19. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, Econometric Society, vol. 51(6), pages 1753-65, November.
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Cited by:
  1. Jeanne Lafortune & Pierre-Andre Chiappori & Murat Iyigun & Yoram Weiss, 2012. "Changing the Rules Midway: The Impact of Granting Alimony Rights on Existing and Newly-Formed Partnerships," Documentos de Trabajo, Instituto de Economia. Pontificia Universidad Católica de Chile. 424, Instituto de Economia. Pontificia Universidad Católica de Chile..
  2. Chiappori, Pierre-André & Iyigun, Murat & Weiss, Yoram, 2008. "An Assignment Model with Divorce and Remarriage," IZA Discussion Papers 3892, Institute for the Study of Labor (IZA).
  3. Fisher, H., 2011. "Divorce Property Division and the Decision to Marry or Cohabit," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1101, Faculty of Economics, University of Cambridge.
  4. Böheim, René & Francesconi, Marco & Halla, Martin, 2012. "Does Custody Law Affect Family Behavior In and Out of Marriage?," IZA Discussion Papers 7064, Institute for the Study of Labor (IZA).
  5. Francesconi, Marco & Rainer, Helmut & van der Klaauw, Wilbert, 2008. "Unintended Consequences of Welfare Reform: The Case of Divorced Parents," IZA Discussion Papers 3891, Institute for the Study of Labor (IZA).
  6. Kristin Mammen, 2008. "The Long-Term Effects of the Divorce Revolution: Health, Wealth, and Labor Supply," Working Papers, Center for Retirement Research at Boston College wp2008-22, Center for Retirement Research, revised Nov 2008.
  7. Alessandra Voena, 2010. "Yours, Mine and Ours: Do Divorce Laws affect the Intertemporal Behavior of Married Couples??," 2010 Meeting Papers, Society for Economic Dynamics 1329, Society for Economic Dynamics.
  8. Alessandra Voena, 2011. "Yours, Mine and Ours: Do Divorce Laws Affect the Intertemporal Behavior of Married Couples?," Discussion Papers, Stanford Institute for Economic Policy Research 10-022, Stanford Institute for Economic Policy Research.

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