Reevaluating the cost of exit — how unilateral divorce law has changed US divorce patterns

Gary Becker, in his famous book A Treatise on the Family, proposed a pragmatic way to analyze marriage and divorce. Before entering marriage, the male and the female know their own benefits of staying single. They will marry if their joint payoff from the marriage exceeds the total of their benefits when single. The payoff (benefit) here is assumed to be income for simplicity. Of course, marriage produces non monetary output, such as children and the feeling of security, which are evaluated separately.

After getting married, a couple might find their benefit of staying in the marriage lower than expected — their partner may be earning less or the two of them simply don’t get along well. At the same, their outside options — denoted as earning potential when they’re single — is also likely to change as well. Many women give up their job after getting married, which decreases their wage if they want to reenter the labor force. On the contrary, married men often earn a higher wage (sometimes called a marital wage premium) than single men.

Unilateral divorce law was widely adopted by the US states during the 1980s. Before that most states supported only bilateral divorce which requires the consent from both parties of the marriage. By the Coase Theorem, if a couple knows each others’ payoffs from the marriage and their outside options and they can bargain costlessly, divorce is always efficient. If the husband wants to divorce but the wife does not, he can always transfer some of his gains from exiting the marriage to his wife and make both of them better off than staying married. Therefore if the Coase Theorem holds, the switch from bilateral to unilateral divorce law should not affect individual’s propensity to divorce.

Several empirical studies attempted to test this. One of the earliest and most influential is Peters (1981). She used Current Population Survey (CPS) data and found support for symmetric information model in marriage. Friedberg (1998) used state panel data and found that unilateral law had considerably raised divorce rates. Justin Wolfers (2006) added dynamics into the model by introducing lagged effects along with state time trends. His findings are consistent with Friedberg’s but he also found the impact of unilateral divorce laws fade away after a decade. Recently, Iyavarakul, McElroy, and Staub (2011) developed Cohort Panel Data Model (CPDM) and summarized the strengths and weaknesses of previous findings. Their results corroborate the Coase Theorem.

Policies aimed at encouraging marriages can also increase divorce.

Zax and Fleuk’s working paper “Marriage, Divorce, Income and Marriage Incentives” describes how military benefits raised the value of marrying male officers and encouraged more unhealthy marriages. They used data on two groups of 18-year-olds, one drafted and the other not, and tracked their military activities, marriage status, and earnings. Surprisingly, there appeared a tide of marriages at the time that those young men were drafted, but many ended up in divorce. They also found that the marriages formed at the end of their military service tend to last much longer and those men earn a higher income.

References:

Friedberg, L. 1998. “Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data,” American Economic Review 88(3): 608-627.

Iyavarakul T., McElroy M. , and Staub, K. 2011. “Dynamic Optimization in Models for State Panel Data: A Cohort Panel Data Model of the E§ects of Divorce Laws on Divorce Rates.”

Peters, E. 1981. “Marriage and Divorce: Informational Constraints and Private Contracting,” American Economic Review 76(3): 437-454.

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