Free to Leave? A Welfare Analysis of Divorce Regimes

62 Pages Posted: 25 Sep 2014

See all articles by Raquel Fernández

Raquel Fernández

New York University - Leonard N. Stern School of Business, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Joyce Cheng Wong

New York University (NYU)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

During the 1970s the US underwent an important change in its divorce laws, switching from mutual consent to a unilateral divorce regime. Who benefited and who lost from this change? To answer this question we develop a dynamic life-cycle model in which agents make consumption, saving, labor force participation (LFP), and marriage and divorce decisions subject to several shocks and given a particular divorce regime. We calibrate the model using statistics relevant to the life-cycle of the 1940 cohort. Conditioning solely on gender, our ex ante welfare analysis finds that women would fare better under mutual consent whereas men would prefer a unilateral system. Once we condition not only on gender but also on initial productivity, we find that men in the top three quintiles of the initial productivity distribution are made better off by a unilateral system as are the top two quintiles of women; the rest prefer mutual consent. We also find that although the change in divorce regime had only a small effect on the LFP of married women in the 1940 cohort, these effects would be considerably larger for a cohort who lived its entire life under a unilateral divorce system.

Keywords: divorce, gender inequality, household bargaining, life-cycle behavior

JEL Classification: D130, J12, J16, K36

Suggested Citation

Fernández, Raquel and Wong, Joyce Cheng, Free to Leave? A Welfare Analysis of Divorce Regimes (June 2014). CEPR Discussion Paper No. DP10047, Available at SSRN: https://ssrn.com/abstract=2501519

Raquel Fernández (Contact Author)

New York University - Leonard N. Stern School of Business, Department of Economics ( email )

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Joyce Cheng Wong

New York University (NYU) ( email )

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