The Market For Divorce

In order to provide society the highest level of utility in the future, children's human capital should be maximized. In a market, there are two ways to increase the equilibrium quantity: increase the supply or increase the demand. In order to shift out the supply curve of human capital, improvements must be made to the production of human capital in children at every level of investment. One way to do this would be to improve the quality of education. Another way would be to improve home environments for children. As previously discussed, divorce laws can affect home environments by increasing opportunistic behavior. A fault-based divorce scheme decreases opportunistic behavior and thus facilitates an outward shift in the human capital schedule, increasing the level of human capital in children. The other way to increase equilibrium human capital is to increase investment in human capital. One way to do this is to decrease the likelihood of divorce. As we have seen, no-fault divorce laws increase the likelihood of divorce and thus decrease the investment in children. A way to increase investment in children's human capital is to require more investment in children as part of a divorce settlement.28 This would increase investment in children not only by increasing investment in children after divorce, but also by decreasing the probability of divorce by increasing the costs associated with divorce. Another way to increase investment in children is by rewarding parents for investing in children's human capital. This could be made part of the determination of division of present and future wealth in divorce settlements.29

In general, the efficient level of investment in children's human capital is the level invested by a perfect marriage. The market for divorce determines the quantity of divorces. The quantity of divorces in turn has a large effect on the demand for investment in human capital. For optimal investment in children's human capital, laws should seek to achieve market equilibrium equivalent to the level that would be produced by an efficient divorce rate. The current no-fault divorce laws have been demonstrated to be inefficient. Accordingly, these laws result in inefficiently low levels of investment in the human capital of children. In addition to adopting fault-based divorce laws, lawmakers should seek to examine all divorce laws to see how they affect the market for divorce and thus the market for the human capital of children, and set these laws to the levels that provide efficient incentive effects leading to optimal levels of divorce and investment in children's human capital.

Source List

Becker, G.S. 1981. A Treatise on the Family. Cambridge, MA and London: Harvard University Press; enlarged edn, 1991.

Brinig, Margaret F. and Steven M. Crafton. "Marriage and Opportunism" Journal of Legal Studies. 23 J. Legal Stud. 869. June, 1994

Geddes, Rick and Paul J. Zak. "The Rule of One-Third" Journal of Legal Studies. 31 J. Legal Stud. 119. January, 2002

Kreider, Rose M. and Jason M. Fields, 2001. Number, Timing, and Duration of Marriages and Divorces: Fall 1996. Current Population Reports, P70-80. U.S. Census Bureau, Washington DC

Mnookin, Robert H. Divorce Article in Law and Economics Dictionary

Posner, R.A. 1973. Economic Analysis of the Law. Boston: Little, Brown & Co.; 5th edn, 1998.

Zelder, Martin. "Inefficient Dissolutions as a Consequence of Public Goods: The Case of No-Fault Divorce" Journal of Legal Studies, vol. XXII, June 1993.

Be Sure to Continue to Page 5 of "The Market For Divorce".