The production function for human capital in children depends on many factors. One is the home environment in which the child is raised. The more nurturing the home environment, the more investment in a child's human capital translates into actual increases in the child's human capital. No-fault divorce increases opportunistic behavior22 during marriage and thus hurts the home environment for children, decreasing the value of investment in human capital and thus the overall level of human capital in children. The production function of human capital also depends on social factors that contribute to the production of human capital. Peer pressure to do drugs and join gangs and other factors that do not facilitate work-conducive environments decrease the effectiveness of investment in children's human capital. Society's focus on educational quality has a major influence on the production function of human capital. Anything else that affects the ability of investment in children to increase their human capital affects the supply curve in the market model of human capital in children.
The demand for human capital of children depends on the investment parents make in their children's human capital. The slope of the demand curve depends on the relationship between children's human capital and the desire of parents to invest in their children. When the level of their children's human capital is low, parents want to increase investment in their children to increase their children's future earning potential. This means that the investment curve is steep when human capital is low.23 As parents' investment in their children increases, parents exhibit a diminishing marginal desire to invest in their children. This is due to the fact that parents have to weigh the benefits of investing in their children against the costs of investing in their children-decreased personal consumption. In addition, parents realize that marginal increases in investment in human capital have diminishing returns it terms of producing more human capital, thus causing parents to decrease marginal investment when human capital is higher. Thus, when children have a higher level of human capital, parents do not invest as much in their children. 24 The result is a demand curve for human capital in children that is upward sloping but concave down, steeper at lower levels of investment and human capital and flatter at higher levels of human capital and investment. The intersection of this curve with the human capital production function determines the equilibrium level of human capital in children and investment in children's human capital.25
Parents' investment in their children depends on several factors. It depends on government laws that require a minimal level of investment. These laws include compulsory public education and child labor laws, as well as divorce requirements of childcare. Investment in children also depends on parents' desire to provide a good future for their children, as well as the sometimes competing desire of parents to provide a good future for themselves. The greater the probability of divorce, the more incentive there is for parents to invest in their own human capital instead of in their children's, especially for the parent that has more responsibility for caring for the children and thus a lower market-productive capacity.26 No-fault divorce, by increasing the likelihood of divorce, decreases the investment in children's human capital in this way.27 All of these factors determine the market demand for investment in children's human capital by parents.
Be Sure to Continue to Page 4 of "The Market For Divorce".
