Divorce Laws , Remarriage and Spousal Welfare ∗

The standard Beckerian model of spousal matching in the marriage market can be used to investigate marriage patterns under static conditions. However, modern marriage markets are characterized by high turnover, whereby many individuals divorce and remarry. We develop a two-sided matching model with positive sorting, divorce and remarriage, under various assumptions about spousal commitment levels. As in the static model, competition determines lifetime expected utilities. However, the intertemporal allocation of welfare depends on the laws that govern the distribution of spousal incomes (or the underlying assets that produce those incomes) upon divorce. We then analyze the impact of changes in the property division upon divorce, considering for instance a reform that favors women. The consequences crucially depend on whether marriage took place before or after the reform. The short-term impact of reform on the allocations of already married wives is positive. However, its long-term impact on yet unmarried women is not, because such a reform generates lower utility for women within marriage which exactly offsets their higher prospective divorce settlements. Finally, we show that when remarriage is possible, more complex effects occur: the reform typically alters divorce probabilities and it may affect the total surplus generated by marriage. ∗We thank Tumer Kapan and Robert Pollak for useful comments and suggestions as well as workshop participants at the 2008 SOLE Meetings, the University of Chicago, New York University, Cornell University, the University of Calgary and the conference on the New Economics of the Family at the Milton Friedman Institute for Research in Economics. Pierre-Andre Chiappori gratefully acknowledges financial support by the NSF Economics award No: SES-05-32398 and Murat Iyigun thanks NSF for Human and Social Dynamics Grant No: SES-0527751. †Corresponding author: Economics Department, Columbia University, 1009A International Affairs Building, MC 3308, 420 West 118th Street, New York, NY 10027. E-Mail: [email protected]. Phone: (212) 854-6369. Fax: (212) 854-8059. ‡University of Colorado. §Tel Aviv University.