Investment in Child Quality Over Marital States1

Policies governing divorce and parenting, such as child support orders and enforcement, child custody regulations, and marital dissolution requirements, can have a large impact on the welfare of parents and children. Recent research has produced evidence on the responses of divorce rates to unilateral divorce laws and child support enforcement. We argue that in order to assess the child welfare impact of family policies, one must consider their in‡uence on parents’investments in their children as well as the stability of the marginal marriage. Further, we expect that changes in the regulatory environment induce changes in the distribution of resources within both intact and divided families. We develop a continuous time model of parents’marital status choices and investments in children, with the main goal being the determination of how policies toward divorce in‡uence outcomes for children. Preliminary estimates are derived for model parameters of interest, and simulations based on the model explore the e¤ects of changes in custody allocations and child support standards on outcomes for children of married and divorced parents. We …nd that divorce laws have large impacts on investments in child quality improvements both within intact and nonintact households. Large changes in divorce regulations regarding custody arrangements and child support transfers have noticeable but small impacts on average child quality. However, they do have large e¤ects on the distribution of parental welfare in the married and divorced states. JEL codes: J12, J13, J18