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Yours, Mine and Ours: Do Divorce Laws affect the Intertemporal Behavior of Married Couples??

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  • Alessandra Voena

    (Stanford University)

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    Abstract

    Divorce laws establish spouses' individual property rights over household resources and determine when divorce is allowed. This paper examines how such laws influence the intertemporal behavior and the welfare of U.S. married couples. I build a model of household choice about consumption, labor supply and divorce under multiple divorce law regimes and I estimate it using exogenous variation in U.S. divorce laws from the 1970s to the 1990s. Couples responded to equal division of property and unilateral divorce by increasing tangible assets up to 19%, which suggests the presence of a strong income effect for the primary earner, and by reducing female employment by over 5 percentage points, because the threat of divorce granted additional bargaining power to married woman. The bargaining weight of women implied by these responses in the model corresponds to a third of the weight of men. This indicates that equal division of assets benefited women when it was first introduced, as they has such low weight in marriage decision. However, counterfactual experiments show that equal division may be potentially detrimental to women as they gain equality in their marriage. When men and women have the same bargaining weight, women are better off in a separate property regime, as they may need more assets than their husband to smooth consumption when going into a divorce.

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    File URL: http://www.economicdynamics.org/meetpapers/2010/paper_1329.pdf
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    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1329.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:1329

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    1. Libertad González Luna & Berkay Özcan, 2008. "The risk of divorce and household saving behavior," Economics Working Papers 1111, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Saku Aura, 2002. "Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining," Working Papers 0217, Department of Economics, University of Missouri.
    3. Attanasio, O. & Low, H. & Sanchez-Marcos, V., 2004. "Explaining Changes in Female Labour Supply in a Life-cycle Model," Cambridge Working Papers in Economics 0451, Faculty of Economics, University of Cambridge.
    4. Amalia Miller, 2011. "The effects of motherhood timing on career path," Journal of Population Economics, Springer, vol. 24(3), pages 1071-1100, July.
    5. Alberto Alesina & Paola Giuliano & Nathan Nunn, 2011. "Fertility and the Plough," American Economic Review, American Economic Association, vol. 101(3), pages 499-503, May.
    6. Del Boca, Daniela & Flinn, Christopher, 2012. "Endogenous household interaction," Journal of Econometrics, Elsevier, vol. 166(1), pages 49-65.
    7. Helmut Rainer, 2003. "Should We Write Prenuptial Contracts?," Economics Discussion Papers 572, University of Essex, Department of Economics.
    8. repec:bla:restud:v:74:y:2007:i:3:p:857-895 is not listed on IDEAS
    9. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
    10. Pierre-André Chiappori & Murat Iyigun & Yoram Weiss, 2008. "An Assignment Model with Divorce and Remarriage," Working Papers 2009-002, Becker Friedman Institute for Research In Economics.
    11. Chiappori, Pierre-André & Iyigun, Murat & Weiss, Yoram, 2007. "Public Goods, Transferable Utility and Divorce Laws," IZA Discussion Papers 2646, Institute for the Study of Labor (IZA).
    12. 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.
    13. Jerome Adda & Russell W. Cooper, 2003. "Dynamic Economics: Quantitative Methods and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012014, December.
    14. Johnson, William R & Skinner, Jonathan, 1986. "Labor Supply and Marital Separation," American Economic Review, American Economic Association, vol. 76(3), pages 455-69, June.
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    Cited by:
    1. Matthias Doepke & Michèle Tertilt, 2010. "Does Female Empowerment Promote Economic Development?," Working Papers id:3189, eSocialSciences.

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