• Corpus ID: 244073925

Marriage, marital investments, and divorce: Theory and evidence on policy non neutrality

@inproceedings{Reynoso2019MarriageMI,
  title={Marriage, marital investments, and divorce: Theory and evidence on policy non neutrality},
  author={Ana Teresa Fari{\~n}a Reynoso},
  year={2019}
}

• A. Reynoso
• Published 2019
• Economics

In the traditional marriage market literature, policies affecting partners’ property rights do not affect who marries whom. In this paper I build a theory that shows that this neutrality result breaks down if we consider marital investments which returns are unverifiable to courts and accumulate in the private account of one of the spouses. I develop an equilibrium model of marriage, household specialization, and divorce in which working spouses with stay-at-home partners accumulate relatively more human capital (a feature verified in the data). In this environment, I consider a policy change that decreases the commitment of ex-spouses to share the returns from the human capital accumulated during the marriage. I show that such a policy gives rise to an equilibrium with higher incidence of two earner households (even when specialization is efficient) and higher spousal assortative matching in human capital, relative to the pre-reform equilibrium. This prediction is supported by empirical evidence showing that the introduction of unilateral divorce in the US (a regime that reduced the enforcement of transfers among ex-spouses) is associated with higher sorting in education, parental education, and pre-marital labor earnings among newlyweds. ∗Department of Economics, Yale University, 37 Hillhouse Av., New Haven, CT 06511, [e-mail]. I am extremely grateful to my advisors Joseph Altonji, Costas Meghir, Larry Samuelson, and Christopher Udry for their guidance and support. I am also grateful to Pierre André Chiappori for many fruitful discussions throughout this project. I also thank Francesco Agostinelli, V Bhaskar, Monica Costa Dias, Tibor Heumann, Ilse Lindenlaub, Corinne Low, Chiara Margaria, Corina Mommaerts, Esteban Peralta, Tommaso Porzio, Meredith Startz, James Thomas, Fernando Tohmé, Alessandra Voena, Yu Jung Whang, and seminar participants at Yale and the 2017 Young Economists Symposium for helpful comments, discussions, and suggestions. All errors are mine.