Munich Personal RePEc Archive

How to carve a medical degree: comment

Holahan, William L and Perlman, Richard (1991): How to carve a medical degree: comment. Published in: American Economic Review (1991): pp. 1015-1016.

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Abstract

Division of Assets at divorce is a major source of contention. This comment refines a paper by Borenstein and Courant (1989) in which they show how to treat investment in educational degrees during a marriage as an asset to be divided between the educated spouse and the supporting spouse who "put the educated spouse through school." B-C treat the asset as a virtual loan with priority claim for repayment against the physical and monetary assets of the marriage, and with a simple formula: repay the loan with interest.

This paper shows that the B-C rule is biased against the student spouse and encourages strategic divorce and refines the amount to be paid back and the interest to be applied. By evaluating the virtual loan in each time period using market rates of interest, and acknowledging enhanced consumption as a partial or complete repayment of virtual educational loans, the rule becomes both fairer to the student spouse and neutral with respect to the divorce decision.

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