The Impact of Divorce Laws on Marriage-Specific Capital

This paper considers how divorce law alters the incentives for couples to invest in their marriage, focusing on the impact of unilateral divorce laws on investments in new marriages. Differences across states between 1970 and 1980 provide useful quasi-experimental variation with which to consider incentives to invest in several types of marriage-specific capital: spouse’s education, children, household specialization, and home ownership. I find that adoption of unilateral divorce—regardless of the prevailing property-division laws—reduces investment in all types of marriage-specific capital considered except home ownership. In contrast, results for home ownership depend on the underlying property division laws. I would like to thank Claudia Goldin, Caroline Hoxby, Lawrence Katz, John Knowles, and Justin Wolfers for helpful comments. This paper also benefited from the input of seminar participations at Wharton, the Society of Labor Economics 2005 annual meetings, and the IZA/SOLE 2005 transatlantic meetings, and the NBER Summer Institute. Thanks to Leandra DeSilva, Doug Geyser, and Adam Isen for their research assistance. Generous funding from the Zull/Lurie Real Estate Center is gratefully acknowledged.