Investment in Child Quality Over Marital States

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. In this paper the authors argue that in order to assess the child welfare impact of family policies, one must consider their influence on parents’ investments in their children as well as the stability of the marginal marriage. Further, the authors expect that changes in the regulatory environment induce changes in the distribution of resources within both intact and divided families. The authors 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 influence outcomes for children. Estimates are derived for model parameters of interest using the method of simulated moments, and simulations based on the model explore the effects of changes in custody allocations and child support standards on outcomes for children of married and divorced parents. We find that, while small changes in children’s academic attainment are induced by significant shifts in custody and support, the major effects of these policies in both intact and divided households are on the distribution of welfare between parents. In addition, children’s attainments are not necessarily best served by the divorce-minimizing policy.