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The Becker–Coase Theorem Reconsidered

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  • Chiappori, Pierre-Andre
  • Iyigun, Murat
  • Weiss, Yoram

Abstract

We reconsider the well-known Becker–Coase (BC) theorem according to which changes in divorce law should not affect divorce rates. We do that in a context of households that consume public goods in addition to private goods. For the Becker–Coase theorem to hold in this setting, 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 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 either the marginal rate of substitution between public and private goods or even the cardinalization of a spouse’s utility), then the Becker–Coase theorem holds only for very specific preferences. 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.

Suggested Citation

  • Chiappori, Pierre-Andre & Iyigun, Murat & Weiss, Yoram, 2015. "The Becker–Coase Theorem Reconsidered," Journal of Demographic Economics, Cambridge University Press, vol. 81(2), pages 157-177, June.
    • Handle: RePEc:cup:demeco:v:81:y:2015:i:2:p:157-177_1
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    Cited by:

    1. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    2. David de la Croix & Fabio Mariani & Marion Mercier, 2023. "Driven By Institutions, Shaped By Culture: Human Capital And The Secularization Of Marriage In Italy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1777-1818, November.
    3. Rossin-Slater, Maya & Wüst, Miriam, 2018. "Parental responses to child support obligations: Evidence from administrative data," Journal of Public Economics, Elsevier, vol. 164(C), pages 183-196.
    4. Bredtmann, Julia & Vonnahme, Christina, 2017. "Less alimony after divorce: Spouses' behavioral response to the 2008 alimony reform in Germany," Ruhr Economic Papers 702, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Edith Aguirre, 2019. "Do changes in divorce legislation have an impact on divorce rates? The case of unilateral divorce in Mexico," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-24, December.
    6. Martin Browning & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2021. "Stable marriage, household consumption and unobserved match quality," Working Papers of Department of Economics, Leuven 679647, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    7. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.
    8. Lauren HOEHN-VELASCO & Jacob PENGLASE, 2023. "Changes in assortative matching and educational inequality: evidence from marriage and birth records in Mexico," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 89(4), pages 587-607, December.
    9. Hanno Foerster, 2019. "Untying the Knot: How Child Support and Alimony Affect Couples' Decisions and Welfare," CRC TR 224 Discussion Paper Series crctr224_2019_115v2, University of Bonn and University of Mannheim, Germany.
    10. Fabio Blasutto & Egor Kozlov, 2020. "(Changing) Marriage and Cohabitation Patterns in the US: do Divorce Laws Matter?," 2020 Papers pbl245, Job Market Papers.
    11. Miguel Olivo-Villabrille, 2022. "The marital earnings premium: an IV approach," Empirical Economics, Springer, vol. 62(2), pages 709-747, February.
    12. Hanno Foerster, 2019. "The Impact of Post-Marital Maintenance on Dynamic Decisions and Welfare of Couples," Boston College Working Papers in Economics 982, Boston College Department of Economics.
    13. Helmut Dietl & Markus Lang & Johannes Orlowski & Philipp Wegelin, 2023. "The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets," Working Papers 398, University of Zurich, Department of Business Administration (IBW).
    14. Hertegård, Edvin, 2024. "Divorce law reform, family stability, and children's long-term outcomes," Working Paper Series 2024:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    15. Pierre–André Chiappori & Natalia Radchenko & Bernard Salanié, 2018. "Divorce and the duality of marital payoff," Review of Economics of the Household, Springer, vol. 16(3), pages 833-858, September.
    16. Julia Bredtmann & Christina Vonnahme, 2019. "Less money after divorce – how the 2008 alimony reform in Germany affected spouses’ labor supply, leisure and marital stability," Review of Economics of the Household, Springer, vol. 17(4), pages 1191-1223, December.
    17. Geghetsik Afunts & Stepan Jurajda, 2022. "Who Divorces Whom: Unilateral Divorce Legislation and the Educational Structure of Marriage," CERGE-EI Working Papers wp740, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    18. Korhonen Marko & Puhakka Mikko, 2021. "The Behavior of Divorce Rates: A Smooth Transition Regression Approach," Journal of Time Series Econometrics, De Gruyter, vol. 13(1), pages 1-19, January.

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