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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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    File URL: http://www.economicdynamics.org/meetpapers/2010/paper_1127.pdf
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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. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
    2. Lundberg, S. & Pollak, R.A., 1991. "Separate Spheres Bargaining and the Marriage Market," Discussion Papers in Economics at the University of Washington 91-08, Department of Economics at the University of Washington.
    3. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    4. Konrad, Kai A & Lommerud, Kjell Erik, 1996. "The Bargaining Family Revisited," CEPR Discussion Papers 1312, C.E.P.R. Discussion Papers.
    5. Pierre-André Chiappori & Richard Blundell & Costas Meghir, 2002. "Collective labour supply with children," IFS Working Papers W02/08, Institute for Fiscal Studies.
    6. 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.
    7. 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.
    8. Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," Cahiers de recherche 0103, Université Laval - Département d'économique.
    9. Thomas, D., 1989. "Intra-Household Resource Allocation: An Inferential Approach," Papers 586, Yale - Economic Growth Center.
    10. Shelly Lundberg & Robert Pollak, 2003. "Efficiency in Marriage," Review of Economics of the Household, Springer, vol. 1(3), pages 153-167, September.
    11. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    12. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers 92-23, DELTA (Ecole normale supérieure).
    13. Maurizio Mazzocco, 2007. "Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment," Review of Economic Studies, Wiley Blackwell, vol. 74(3), pages 857-895, 07.
    14. Schultz, T.P., 1990. "Testing The Neoclassical Model Of Family Labor Supply And Fertility," Papers 601, Yale - Economic Growth Center.
    15. 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.
    16. Ian Smith, 2003. "The Law and Economics of Marriage Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 201-226, 04.
    17. 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).
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