When the homemaker gets her share in the divorce
Blog post based on an article published in Journal of Demographic Economics.
The 1970s witnessed drastic changes in laws governing divorce. The most influential reform is widely known as the “no-fault divorce reform”, which allowed the dissolution of marriage to be based on no-fault grounds such as “irreconcilable differences” and “incompatibility”. This has largely reduced the commitment value of marriage, as spouses could just walk out of the marriage with relative ease.
When marriage is no longer forever, the laws governing the division of properties accumulated during marriage at divorce is of utmost importance, as it has tremendous implications on the wellbeing of spouses after divorce. At the time when the no-fault divorce reform was introduced, most states in the United States were under the common law regimes, which would simply divide assets according to legal titles (i.e., who legally owns the property) at divorce. This had put the spouses that devoted most of their time to homemaking in an extremely disadvantageous position, as their non-financial contribution to their marriage was not recognized in property division. As a direct consequence of this legal reform, many homemakers were largely impoverished after divorce.
In response to this “homemaker’s hazard”, many women increased their market labor supply as an insurance against the risk of divorce and consequently the specialization gain to marriage had been much reduced. Some couples might simply choose to opt out of marriage altogether.
The negative impact of the no-fault divorce law on the marriage institution had prompted many states to develop laws that recognize homemakers’ contribution in dividing marital properties at divorce in the 1980’s, which I refer to as the “homemaking provision”. Conceivably this law could at least restore part of the lost commitment value of marriage as the ex-post divorce property rights of the homemakers become better protected.
In my paper “Credible Commitments and Marriage”, I estimate the effect of this homemaking provision on marriage using both state and individual level data. I find that this law has indeed substantially stimulated marriage: the provision increases the state level marriage rate by at least 10.6 percent in the long term while it increases the probability of marriage for women by at least 9 percent.
This effect of the homemaking provision highlights the importance of credible commitments in making marriage an attractive deal for entering parties and supports the finding of previous studies that the legal framework governing marriage and its dissolution could substantially alter couples’ decision to marry as well as behavior within the marriage.
Read the full article here.