Marriage Market, Divorce Legislation, and Household Labor Supply

TLDR

The sex ratio in the marriage market and divorce rules are distribution factors that influence bargaining positions without altering preferences or the joint budget set. The paper develops a theoretical framework to analyze how the marriage market and divorce legislation affect household labor supply. The authors extend Chiappori’s collective labor supply model to incorporate distribution factors and estimate it with 1988 PSID data. The model imposes new restrictions that are not rejected by the data, and it confirms that a favorable sex ratio and divorce laws for women influence labor supply and intrahousehold decisions as predicted, with sizable effects.

Abstract

This paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply. In our approach, the sex ratio in the marriage market and the rules governing divorce are examples of "distribution factors." These factors are defined as variables that affect the household members' bargaining position but not preferences or the joint budget set. We extend the collective labor supply model developed by Chiappori to allow for distribution factors. We show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process. The model is estimated using PSID data for the year 1988. Our results do not reject the restrictions imposed by the model. Also, the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects.