Breaking Up is Hard to Do: The Economics of Spousal Support
The introduction of "no-fault" divorce in most of North America has eliminated the traditional basis for spousal support without providing a satisfactory alternative. Women who have reduced their labor force participation to look after a home and raise children are particularly disadvantaged by divorce. Recent cases and legal scholarship have attempted to find ways of recognizing the investment that a woman has made in the family and in her husband's career. In a recent case, Elliot v. Elliot, an Ontario court awarded the woman half of the difference between her earnings had she not married and her earnings after the divorce. A logical extension of the case would also award her half of any increase in his earnings resulting from the marriage. The model developed in this paper highlights the changes in earnings that result from specialization in housework or market work, investment in children, and investment in the spouse's human capital. The efficiency of marriage matches and divorce are also analyzed. Many alternative concepts of spousal support are presented within the framework of the model, and the incentive effects on human capital, marriage, and divorce are considered. Although no measure is perfect, the paper concludes that the approach taken in Elliot, adjusted for additional leisure enjoyed during marriage, offers a reasonable compromise between competing objectives. Property division is also considered within the same framework.
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