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Economic Models of Marriage and Divorce

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Throughout the decades, economic models of marriage and divorce have often been labeled as obscure and outside the mainstream realm of economics. However, when Becker's analysis on the theory of marriage was first published in 1973 and 1974, he established results that had a significant impact on the way economists view marriage and divorce. In The New Economics of Human Behavior, Becker's theory of marriage analysis utilized two basic tools in its economic analysis: cost-benefit analysis (rational choice theory) and market analysis. His results stemmed from the examination of the effects of switching from mutual consent divorce laws to no-fault divorce laws.

The focal point of Becker's analysis came from studying the effects of no-fault divorce laws that were eventually adopted by all states by 1987. At its inception, no-fault divorce laws were seen as extremely positive solutions to settlement issues in divorce feuds. However, published research by Weitzman and Dixon found that no-fault divorce laws actually greatly diminished women's financial situations when measuring financial settlements gained after divorce. Becker had theorized this effect in his theory of marriage and stated "The switch to no-fault divorce laws is expected to have a negative effect on the material well-being of women after divorce" and explained that these new laws gave a spouse a unilateral right to divorce. The no-need-for-consent aspect of the new laws reduced the bargaining power of the spouse standing to lose from divorce. Throughout Becker's analysis, women were associated party losing the most because of the fact that women's marriage market conditions deteriorated faster than men's.

Becker's next implication was that "no-fault divorce would have no long-run effect on divorce rates" because it affects property rights rather than the decision to divorce. He then goes on to predict, "No-fault divorce laws will discourage marriage" and analyzed it by using the concept of spousal labor and marriage market models. Within this model, Becker uses analytical tools used in traditional labor economics to analyze marriage by assuming that men were employers of women's spousal labor and women as the supplier of such labor. For simplicity, Becker focuses on spousal labor supplied by women by depicting an aggregate upward-sloping supply of spousal labor by women and downward sloping demand for spousal labor by men, with dimensions of quantity on the horizontal axis and equilibrium wages on the vertical axis, w*.

Becker viewed that laws regulating marriage and divorce influenced aggregate conditions in markets for spousal labor. When a law lowers the financial well being of divorced women, the decision to enter marriage will be based on the anticipated benefits and costs. Because no-fault divorce laws have lowered the value of divorce settlements for women, men's willingness to pay for spousal labor declines. This displays a reduction in men's demand for spousal labor and because women have an upward-sloping supply curve and that no-fault divorce laws cause a drop in demand, women will be less willing to marry after the passage of no-fault divorce laws than before. Through this analysis, Becker also concludes that "No-fault divorce laws are expected to encourage the labor force participation of married women" because of the reduction of expected benefits a women could gain from a career at home. No-fault divorce laws encouraged women to participate in the labor market. Becker also states that differentials are present in marriage. The more these compensating differentials offset the effect of no-fault divorce laws on the wages from spousal labor, the less these new laws will have an impact on labor force participation of married women and marriage rates.

In Becker's theory of marriage, individuals compare their output as single to their output as part of a marriage. Following the assumption of rationality, Becker's analysis concludes that the opportunity cost of marriage to an individual is the value of the forgone alternative, namely his or her output while single. Becker determines that the division of marital output between husband and wife depends on the sex ratio, wage rates, and other factors influencing marriage market conditions.

The first factor examined is the effect that sex ratios, number of men divided by number of women, have on marriage markets. Becker states, "When the sex ratio is high, women benefit from marriage. When the sex ratio is low, men benefit from marriage" implying that the scarce gender in the marriage market benefits more from marriage. Alternatively, according to the G-version of Becker's theory, marriage functions as an institution regulating the supply of spousal labor, where spousal labor is defined as work benefiting a spouse. In examining the relative consumption by husband and wife to sex ratios, the more men relative to women in a given marriage market implies a larger demand by men for women's spousal labor and a smaller supply of spousal labor thereby raising the equilibrium quasi-wage, w*. The more women earn from spousal labor, the more it is likely that women consume what they like and the less it is likely that men consume what they like, thus coming to the hypothesis that, "The higher the sex ratio, the more married women consume in marriage relative to married men".

Becker's theory of marriage also explains why the effect of wages and income depends on whether that income is received by husbands or wives. If women's income increases regardless of marital status, their opportunity cost of marriage is higher, marital output is higher, and therefore higher consumption levels for women in marriage. If men's income increases, their income is higher regardless of marital status, which is likely to increase marital output, but the maximum amount of marital output men will agree to let women consume will decrease as men's income increases. According to the G-version of Becker's theory of marriage, Becker concludes, "Male consumption in marriage is more likely to be affected by male income, whereas female consumption in marriage is more likely to be affected by female income".

The final aspect of Becker's theory of marriage focuses on the analysis of marriage and divorce with the analysis of labor supply. The traditional labor-supply theory states that the value of time in the home always depends on the individual's work status, with the value of time, w*, equal to wage if she works, and w* exceeding wage if she doesn't work. According to the marriage market based model, the value of time is equal to w* based on a marriage market component. The quasi-wage for spousal labor is established in a market for spousal labor

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