Three Essays on Labor Economics
نویسنده
چکیده
This paper studies the reasons for low levels of child support paid by non-custodial divorced fathers. In divorce, non-custodial father’s necessary child support is typically reduced once the mother remarries, as some financial burden of raising their children shifts from biological father to the step-father. This provides an incentive for the father to encourage mother’s remarriage through the use of strategically picked payment level. Assuming father’s income is to some degree unobservable by mother after divorce, his current payment will serve as a signal of his true level of income to the mother, and she will use his payment level to form an expectation of his true income. With a sufficient low level of current payment, she is likely to assume that the father has low income and hence be more likely to remarry, given exogenous and randomly-arriving remarriage options. Thus the father has the potential to manipulate the mother’s remarriage probability for his own benefit. In my paper, I first formulate a theoretical model of the father’s optimal transfer and the mother’s remarriage decision in a two-period dynamic Stackelberg game. The equilibrium closed form solution shows that the father’s optimal transfer is lower when his income is partly unobservable to the mother than when it is fully observable. I then investigate the issue empirically, using data from the Panel Study on Income Dynamics (PSID) in the U.S., examining whether the father’s payment is related to the degree of unobservability of his income, using proxies for that unobservability. The results show that the payment is indeed lower, the greater the degree of unobservability.
منابع مشابه
Essays in Labor Economics
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