Why Divorce Laws Matter: Incentives for Noncontractible Marital Investments under Unilateral and Consent Divorce
The Coase Theorem suggests that married couples will divorce if and only if doing so increases their joint surplus, regardless of the legal rules governing divorce. This does not mean, however, that divorce laws only affect the distribution of rents. Because the distribution of rents affects each spouse's incentives for noncontractible investments, divorce laws can affect the joint welfare of the couple. This article analyzes the effects of the consent divorce regime and the unilateral divorce regime on incentives for selfish and cooperative marital investments. Using these results, the article demonstrates how endogenous choice of marriage with noncontractible investments can explain some recent empirical results concerning the effects of the shift from consent divorce to unilateral divorce. (JEL C78, D1, D23, J12, J18, K3, K36) The Author 2007. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: email@example.com, Oxford University Press.
Volume (Year): 25 (2009)
Issue (Month): 1 (May)
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