Revealed preference characterization of marital stability under mutual consent divorce

Abstract

We present a framework to study household consumption under the assumption of marital stability in the presence of divorce legislation. Using this model, we derive nonparametric conditions that allow us to identify the intrahousehold consumption allocation. We study two integral dimensions of divorce legislation. First, we consider a regime governing divorce itself. The legislation either allows partners to divorce unilaterally at will or requires the mutual consent of both partners to dissolve the marriage. Second, for couples with children, we consider the implications of sole and joint custody arrangements for marital stability. Under sole custody, children reside with the custodian parent, whereas under joint custody, both parents equally share the responsibilities of children after the divorce. We illustrate the importance of these legislative aspects of divorce and marriage in the empirical identification of intrahousehold allocations through an application to household data from Russia. Our results suggest that a model incorporating divorce legislation better fits the data than a benchmark model without divorce legislation, especially for couples with children. Next, we show that ignoring the law-based implications results in notably different estimates of intrahousehold resource shares. For example, we find that a model without divorce legislation significantly underestimates the mother's share of private consumption. Bias in the estimates of intrahousehold allocations can lead to misleading policy implications. We illustrate this by conducting a poverty analysis at the level of individual household members.