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Public Goods, Transferable Utility and Divorce Laws

  • Chiappori, Pierre-André

    ()

    (Columbia University)

  • Iyigun, Murat

    ()

    (University of Colorado, Boulder)

  • Weiss, Yoram

    ()

    (Tel Aviv University)

We reconsider the well known Becker-Coase (BC) argument, according to which changes in divorce laws should not affect divorce rates, in the context of households which consume public goods in addition to private goods. For this result to hold, 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 develop a model in which couples consume public goods and 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 the marginal rate of substitution between public and private goods), then the Becker-Coase theorem holds only under strict quasi-linearity. 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2646.

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Length: 41 pages
Date of creation: Feb 2007
Date of revision:
Publication status: published as 'The Becker-Coase Theorem Reconsidered' in: Journal of Demographic Economics, 2015, 81(2), 157-77
Handle: RePEc:iza:izadps:dp2646
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  1. Schultz, T.P., 1990. "Testing The Neoclassical Model Of Family Labor Supply And Fertility," Papers 601, Yale - Economic Growth Center.
  2. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  3. Lundberg, S.J. & Pollak, R.A. & Wales, T.J., 1994. "Do Husbands and Wives Pool Their Resources? Evidence from U.K. Child Benefit," Discussion Papers in Economics at the University of Washington 94-6, Department of Economics at the University of Washington.
  4. Imran Rasul, 2006. "Marriage Markets and Divorce Laws," Journal of Law, Economics and Organization, Oxford University Press, vol. 22(1), pages 30-69, April.
  5. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November.
  6. 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.
  7. Wolfers, Justin, 2003. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," Research Papers 1819, Stanford University, Graduate School of Business.
  8. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
  9. Fella, Giulio & Manzini, Paola & Mariotti, Marco, 2002. "Does Divorce Law Matter?," IZA Discussion Papers 439, Institute for the Study of Labor (IZA).
  10. Niko Matouschek & Imran Rasul, 2008. "The Economics of the Marriage Contract: Theories and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 59-110, 02.
  11. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  12. Clark, Simon, 1999. "Law, Property, and Marital Dissolution," Economic Journal, Royal Economic Society, vol. 109(454), pages C41-54, March.
  13. Thomas, D., 1989. "Intra-Household Resource Allocation: An Inferential Approach," Papers 586, Yale - Economic Growth Center.
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  15. Betsey Stevenson & Justin Wolfers, 2003. "Bargaining in the Shadow of the Law: Divorce Laws and Family Distress," NBER Working Papers 10175, National Bureau of Economic Research, Inc.
  16. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
  17. Pierre-André Chiappori & Yoram Weiss, 2007. "Divorce, Remarriage, and Child Support," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 37-74.
  18. Bergstrom, Theodore C, 1999. " Systems of Benevolent Utility Functions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 71-100.
  19. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September.
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