Divorce and the Option Value of Marital Search

Filoso, Valerio (2007): Divorce and the Option Value of Marital Search.

Abstract

This works tests whether or not the introduction of divorce law changes the timing of marital search. Common sense suggests that rational agents should adjust to the divorce risk by increasing the average length of search spell, whereas the option value theory stresses the role played by irreversible investments: in this case, the new exit option available to married partners should result in shorter search spells. Using a dynamic model of marital search, a new dataset of retrospective individual Italian data, and two robust statistical specifications based upon the Before-After estimator, we find strong evidence that the legal innovation actually lowered the age at marriage, thereby worsening the level of marital matching, and possibly reinforcing self-fulfilling prophecies of divorce.

• Item Type: MPRA Paper
• Institution: Department of Economic Theory and Applications, University of Naples ``Federico II'', Italy, and CHILD (Centre for Household, Income, Labour and Demographic economics), Turin, Italy
• Language: English
• Keywords: Marital Search; Divorce; Marriage
• Subjects: J - Labor and Demographic Economics > J1 - Demographic Economics > J12 - Marriage ; Marital Dissolution ; Family Structure ; Domestic Abuse; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C41 - Duration Analysis ; Optimal Timing Strategies; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

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