Pierre André Chiappori (Columbia) "Family Economics" - Cemmap

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U w 0 6. Uncertainty and Dynamics in the Collective model 279 Utility Frontier in Marriage θ + θ < 0 Utility Frontier in Divorce M h w D FIGURE 6.2. Pareto frontiers in marriage and divorce, no public goods the spouses, both in marriage and after divorce - not the divorce decision itself. 19 The corresponding intuition is easy to grasp from Figure 6.2. Under transferable utility, both the Pareto frontier when married and the Pareto frontier when divorced are straight line with slope −1. Therefore, they cannot intersect; one Pareto set must be included within the other. The optimal divorce decision simply picks up the larger Pareto set. What legal dispositions can do is vary the post divorce allocation along the post divorce Pareto frontier. But if the latter is located within the Pareto set when married, there always exist a particular redistribution of marital surplus that will make both spouses better off than divorce; if, conversely, it is located outside, then whatever the planned allocation of resources within the couple, it is always possible to redistribute income after divorce in such a way that both agents prefer separation. Finally, it is important to understand the assumptions that are needed for the Becker-Coase theorem to hold. <strong>Chiappori</strong>, Iyigun and Weiss 2007 (from now on CIW) show that there are three. One is that utility is transferable within marriage (which, in our setting, justifies the GQL form taken for 19 A recent attempt to test this theoretical prediction is Wolfers (2006). Uh
280 6. Uncertainty and Dynamics in the Collective model utilities when married). A second requirement is that utility be transferable after divorce; here, we have therefore assumed quasi-linear preferences for singles. Finally, the slopes of the two Pareto frontiers (before and after divorce) must be equal. While these requirements are indeed satisfied in the example just given, they are in fact quite unlikely to hold in reality. For instance, the assumption of quasilinear preferences if single is totally ad hoc . Assume, on the contrary, that preferences if single have the same general form as when married - that is, that: u i ¡ ¢ i i s q ,Q = Fs (Q) q i 1 + G i ¡ ¢ i i s Q, q−1 + θ ,i= a, b The question, now, is whether commodity Q, which was publicly consumed when the couple was married, remains public after divorce. In many cases, it does not; for instance, housing typically stops being jointly consumed after the separation. CIW show that, in that case, the second requirement is not satisfied in general. In other situations, the commodity remains public, in the sense that it still enters both ex-spouse’s utilities; this is the case for children consumption, for instance. However, the utility adults derive from children’s well being may well change after divorce, especially for the parent who does not have full custody. Technically, the F i s function is now different between spouses, which violates either the second or the third requirement. All in all, CIW argue that, in general, these requirements are unlikely to be fulfilled - therefore that the Becker-Coase result is unlikely to hold. An important implication is that the claim, frequently encountered in the literature, that the Becker-Coase theorem is a consequence of the efficiency assumption is incorrect. Whenever any of the CIW requirements is violated, the neutrality result does not hold true. Then the general model developed in the previous subsection, which only assumes efficient behavior (including for divorce decisions), remains valid; but one can find situations in which couples would split under unilateral divorce but not under mutual consent - and also, more surprisingly, cases in which this intuition is reversed, in the sense that divorce occurs under mutual consent but not under unilateral divorce. Figure 6.3, borrowed from Clark (1999) and CIW, illustrates the latter case. With mutual consent, each partner has a "property right" on the allocation within marriage, represented by M. This point is contained in the divorce frontier and both partners can be made better of by renegotiating the divorce settlement and leaving the marriage. In contrast, with unilateral divorce partners have property rights on their divorce allocation, represented by D. This point, however, is contained within the marriage frontier and the partners can find an allocation within marriage that will sustain the marriage.
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Family Economics Martin Browning Pi
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iv 3.2 Householdproduction ........
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vi 6.4 IntertemporalBehavior ......
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viii 11 Marriage, Divorce, Children
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List of Figures 1.1 Marriage Rates
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xiii 4.2 Apotentiallycompensatingva
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Introduction The existence of a nuc
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two distinct solution concepts; one
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were affectedbytherisinginvestments
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Murat Iyigun, Guy Lacroix, Valérie
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Part I Models of Household Behavior
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14 1. Facts there appear to be age,
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16 1. Facts 1.1.4 Transitions The m
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18 1. Facts sumption goods within h
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20 1. Facts may not capture the ful
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22 1. Facts This process is driven
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24 1. Facts 1.4 Children Children a
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26 1. Facts a major policy concern
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28 1. Facts have means for, say, hi
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30 1. Facts [21] Michael, Robert,
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32 1. Facts Age group USA Denmark 1
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34 1. Facts Birth cohort 1931-36 19
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36 1. Facts USA Canada UK Norway Ye
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38 1. Facts Country Male Participat
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40 1. Facts Mother’s Age 20-30 31
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42 1. Facts rate per 1000, 20+ 18 1
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44 1. Facts Marriage rate per 1000
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46 1. Facts percent entering first
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48 1. Facts percent entering divorc
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50 1. Facts 100% 90% 80% 70% 60% 50
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52 1. Facts 1 0.8 0.6 0.4 0.2 0 23
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54 1. Facts 0.8 0.6 0.4 0.2 0 23 25
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56 1. Facts 0.8 0.6 0.4 0.2 0 1968
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58 1. Facts 6.8 6.6 6.4 6.2 6 5.8 2
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60 1. Facts 0.4 0.2 0 -0.2 -0.4 196
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62 1. Facts 0.6 0.4 0.2 0 1968 1970
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64 1. Facts FIGURE 1.23. Age Pyrami
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66 1. Facts 0.6 0.4 0.2 0 1930 1933
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68 1. Facts 100% 80% 60% 40% 20% 0%
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70 1. Facts 0.35 0.3 0.25 0.2 0.15
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72 1. Facts 100% 80% 60% 40% 20% 0%
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74 1. Facts Average number of child
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76 1. Facts Age 28 27 26 25 24 23 1
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78 1. Facts FIGURE 1.37. Consumptio
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80 1. Facts
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82 2. The gains from marriage for o
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84 2. The gains from marriage Q 2 y
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86 2. The gains from marriage this
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88 2. The gains from marriage as wh
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90 2. The gains from marriage ing a
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92 2. The gains from marriage absen
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94 2. The gains from marriage 2.5 C
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96 2. The gains from marriage 2.5.3
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98 2. The gains from marriage This
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100 2. The gains from marriage [14]
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102 2. The gains from marriage
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104 3. Preferences and decision mak
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158 4. The collective model: a form
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200 5. Empirical issues for the col
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330 7. Matching on the Marriage Mar
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332 7. Matching on the Marriage Mar
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334 8. Sharing the gains from marri
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392 9. Investment in Schooling and
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436 10. An equilibrium model of mar
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460 11. Marriage, Divorce, Children
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Pierre André Chiappori (Columbia) "Family Economics" - Cemmap

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