IDEAS home Printed from https://ideas.repec.org/p/wop/wispod/1041-94.html

Welfare effects of fixed and percentage-expressed child support awards

Author

Listed:
  • D. Del Boca
  • C. J. Flinn

Abstract

Over the last decade a large number of states have significantly altered their legal statutes concerning the disposition of divorce cases involving children. In particular, many states have increasingly employed percentage-expressed orders in which child support obligations in a given period are determined as a proportion of the contemporaneous income of the noncustodial parent. In contrast to more traditional systems in which obligations were set in fixed nominal terms at the time of the divorce settlement and were infrequently (or never) updated, the dynamic system has the advantages of allowing children (and the custodial parent) an opportunity to share in the general income gains experienced by the noncustodial parent over the life cycle and of possibly alleviating some noncompliance problems. In this paper we conduct a rather extensive theory-based empirical investigation of the effects of these systems on the income process for divorced fathers and the child support transfer decision. We estimate a flexible statistical model for the income- generation process for divorced fathers which encompasses the period both before and after the divorce. We interpret the estimates from this model to indicate small behavioral effects of the type of order on postdivorce income, but nonrandom assignment (in terms of the means and variances of predivorce income) into the percentage-expressed-order state. Our analysis of the effects of the order type on child support transfers is divided into two parts. In the first, a "reduced form" analysis, we investigate whether or not the divorced father's regime defined as the order type and withholding status can be considered exogenous vis-a-vis the transfer decision, and examine the relative effects of the various regimes on the transfer rate. We further attempt to investigate order-type effects on compliance in the context of a structural model of the compliance decision. The results of the two analyses are for the most part consistent. Percentage orders are generally associated with lower compliance rates, though withholding tends to alleviate the problem. The highest compliance rates are associated with fixed orders coupled with withholding.

Suggested Citation

  • D. Del Boca & C. J. Flinn, "undated". "Welfare effects of fixed and percentage-expressed child support awards," Institute for Research on Poverty Discussion Papers 1041-94, University of Wisconsin Institute for Research on Poverty.
    • Handle: RePEc:wop:wispod:1041-94
    as

    Download full text from publisher

    File URL: http://www.irp.wisc.edu/publications/dps/pdfs/dp104194.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-750, July.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. David Betson & Eirik Evenhouse & Siobhan Reilly & Eugene Smolensky, 1992. "Trade-offs implicit in child-support guidelines," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 11(1), pages 1-20.
    4. Lazear, Edward P. & Michael, Robert T., 1988. "Allocation of Income within the Household," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226469669, August.
    5. Jerry Hausman, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    6. John W. Graham & Andrea H. Beller, 1989. "The Effect of Child Support Payments on the Labor Supply of Female Family Heads: An Econometric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 664-688.
    7. Yoram Weiss & Robert J. Willis, "undated". "An Economic Analysis of Divorce Settlements," University of Chicago - Population Research Center 89-5, Chicago - Population Research Center.
    8. Irwin Garfinkel & Donald Oellerich, 1989. "Noncustodial Fathers’ Ability to Pay Child Support," Demography, Springer;Population Association of America (PAA), vol. 26(2), pages 219-233, May.
    9. Del Boca, Daniela & Flinn, Christopher J., 1990. "The Effect Of Child Custody And Support Arrangements On The Welfare Of Children And Parents," Working Papers 90-16, C.V. Starr Center for Applied Economics, New York University.
    10. Irwin Garfinkel & Marieka M. Klawitter, 1990. "The effect of routine income withholding of child support collections," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(2), pages 155-177.
    11. Del Boca, Daniela & Flinn, Christopher J, 1995. "Rationalizing Child-Support Decisions," American Economic Review, American Economic Association, vol. 85(5), pages 1241-1262, December.
    12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    13. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
    14. Weiss, Yoram & Willis, Robert J, 1985. "Children as Collective Goods and Divorce Settlements," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 268-292, July.
    15. Weiss, Yoram & Willis, Robert J, 1993. "Transfers among Divorced Couples: Evidence and Interpretation," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 629-679, October.
    16. Daniela Del Boca & Christopher J. Flinn, 1994. "Expenditure Decisions of Divorced Mothers and Income Composition," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 742-761.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Flinn, Christopher J, 2000. "Modes of Interaction between Divorced Parents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 545-578, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniela Del Boca, 2003. "Mothers, fathers and children after divorce: The role of institutions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(3), pages 399-422, August.
    2. Robert I. Lerman & Elaine Sorenson, 2003. "Child Support: Interactions between Private and Public Transfers," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 587-628, National Bureau of Economic Research, Inc.
    3. Christine Hauser, 2008. "Child Support Enforcement and Children's Consumption," 2008 Meeting Papers 630, Society for Economic Dynamics.
    4. Del Boca, Daniela & Ribero, Rocio, 1998. "Transfers in non-intact households," Structural Change and Economic Dynamics, Elsevier, vol. 9(4), pages 469-478, December.
    5. Welling, Linda & Bearance, Marci, 2002. "Who's minding the kids? An economic comparison of sole and joint custody," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(1), pages 15-29.
    6. Francesconi, Marco & Muthoo, Abhinay, 2003. "An Economic Model of Child Custody," IZA Discussion Papers 857, IZA Network @ LISER.
    7. Daniela Del Boca & Rocio Ribero, 2003. "Visitations and Transfers After Divorce," Review of Economics of the Household, Springer, vol. 1(3), pages 187-204, September.
    8. Guilhem Bascle, 2008. "Controlling for endogeneity with instrumental variables in strategic management research," Post-Print hal-00576795, HAL.
    9. James J. Heckman, 1991. "Randomization and Social Policy Evaluation Revisited," NBER Technical Working Papers 0107, National Bureau of Economic Research, Inc.
    10. O'Brien, Raymond & Patacchini, Eleonora, 2003. "Testing the exogeneity assumption in panel data models with "non classical" disturbances," Discussion Paper Series In Economics And Econometrics 0302, Economics Division, School of Social Sciences, University of Southampton.
    11. Woutersen, Tiemen & Hausman, Jerry A., 2019. "Increasing the power of specification tests," Journal of Econometrics, Elsevier, vol. 211(1), pages 166-175.
    12. Zhang, Chengsi & Dang, Chao, 2018. "Is monetary policy forward-looking in China?," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 4-14.
    13. Wenting Wang & Longbao Wei, 2021. "Impacts of agricultural price support policy on price variability and welfare: Evidence from China's soybean market," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 3-17, January.
    14. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118.
    15. Böheim, René & Francesconi, Marco & Halla, Martin, 2012. "Does Custody Law Affect Family Behavior In and Out of Marriage?," IZA Discussion Papers 7064, IZA Network @ LISER.
    16. Zhang, Chengsi & Dang, Chao, 2018. "Is Chinese monetary policy forward-looking?," BOFIT Discussion Papers 6/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    17. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December.
    18. Gabriel Caldas Montes & José Américo Pereira Antunes & Alexei Ferreira Araújo, 2021. "Effects of monetary policy and credibility on financial intermediation: evidence from the Brazilian banking sector," Empirical Economics, Springer, vol. 60(3), pages 1191-1219, March.
    19. Walter Beckert, 2019. "A Note on Specification Testing in Some Structural Regression Models," CeMMAP working papers CWP22/19, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:wispod:1041-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/iruwius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.