Yours, Mine and Ours: Do Divorce Laws Affect the Intertemporal Behavior of Married Couples?

Abstract

This paper examines how divorce laws affect couples' intertemporal choices and wellbeing. Exploiting panel variation in U.S. laws, I estimate the parameters of a model of household decision making. Household survey data indicate that the introduction of unilateral divorce in states that imposed an equal division of property is associated with higher household savings and lower female employment, implying a distortion in household assets accumulation and a transfer towards wives whose share in household resources is smaller than the one of their husband. When spouses share consumption equally, separate property or prenuptial agreements can reduce distortions and increase equity.

Keywords: household savings, divorce laws, intra-household allocation

JEL Classification: J12, D91, D13