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Property Division Laws: The Effects on Labor Supply and Household Bargaining

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  • Tümer Kapan

    (The Brattle Group)

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    Abstract

    This paper provides a framework for analyzing the impact of a change in property division law-a natural experiment that affects spouses' bargaining power in a discrete manner-on household decision making. I focus on the 2000 House of Lords decision (White v. White), which led to a more equitable division of assets between divorcing spouses in England and Wales, and estimate its effect on the intrahousehold resource allocation rule using the collective labor supply model. I show that this effect can be expressed as an "equivalent transfer" of household nonlabor income. The "equivalent transfer" concept is then used to demonstrate that the unobserved components of the underlying decision process (the individual preferences and the household resource sharing rule) can be identified nonparametrically from changes in observed labor supply. Empirical analysis using the British Household Panel Survey (BHPS)for 1991-2006 reveals that married women reduced their labor supply after the law change. I also find some evidence that the household resource allocation process changed in their favor.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1127.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:1127

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    1. Pierre-André Chiappori & Richard Blundell & Costas Meghir, 2002. "Collective labour supply with children," IFS Working Papers W02/08, Institute for Fiscal Studies.
    2. Pierre-André Chiappori & Bernard Fortin & Guy Lacroix, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," CIRANO Working Papers 2001s-16, CIRANO.
    3. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December.
    4. Blundell, Richard & Chiappori, Pierre-André & Magnac, Thierry & Meghir, Costas, 2005. "Collective Labour Supply: Heterogeneity and Nonparticipation," IDEI Working Papers 373, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Helmut Rainer, 2005. "Should We Write Prenuptial Contracts?," Discussion Paper Series, Department of Economics 200514, Department of Economics, University of St. Andrews.
    6. Duncan Thomas, 1990. "Intra-Household Resource Allocation: An Inferential Approach," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 635-664.
    7. Shelly Lundberg & Robert A. Pollak, 2001. "Efficiency in Marriage," NBER Working Papers 8642, National Bureau of Economic Research, Inc.
    8. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
    9. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December.
    10. Kaushik Basu, 2006. "Gender and Say: a Model of Household Behaviour with Endogenously Determined Balance of Power," Economic Journal, Royal Economic Society, vol. 116(511), pages 558-580, 04.
    11. Kai A. Konrad & Kjell Erik Lommerud, 2000. "The bargaining family revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 471-487, May.
    12. Ian Smith, 2003. "The Law and Economics of Marriage Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 201-226, 04.
    13. Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-54, June.
    14. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    15. Schultz, T.P., 1990. "Testing The Neoclassical Model Of Family Labor Supply And Fertility," Papers 601, Yale - Economic Growth Center.
    16. Gray, Jeffrey S, 1998. "Divorce-Law Changes, Household Bargaining, and Married Women's Labor Supply," American Economic Review, American Economic Association, vol. 88(3), pages 628-42, June.
    17. Angrist, Joshua, 2001. "How Do Sex Ratios Affect Marriage and Labor Markets? Evidence from America's Second Generation," IZA Discussion Papers 368, Institute for the Study of Labor (IZA).
    18. Marcos A. Rangel, 2006. "Alimony Rights and Intrahousehold Allocation of Resources: Evidence from Brazil," Economic Journal, Royal Economic Society, vol. 116(513), pages 627-658, 07.
    19. Maurizio Mazzocco, 2007. "Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 857-895.
    20. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-46, October.
    21. repec:bla:restud:v:74:y:2007:i:3:p:857-895 is not listed on IDEAS
    22. Iyigun, Murat & Walsh, Randall P., 2005. "Building the Family Nest: Pre-Marital Investments, Marriage Markets and Spousal Allocations," IZA Discussion Papers 1752, Institute for the Study of Labor (IZA).
    23. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," Munich Reprints in Economics 19819, University of Munich, Department of Economics.
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