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THE BECKER–COASE THEOREM RECONSIDERED

Published online by Cambridge University Press:  20 May 2015

Pierre-Andre Chiappori ,
Murat Iyigun  and
Yoram Weiss
Pierre-Andre Chiappori*
Affiliation:
Columbia University
Murat Iyigun
Affiliation:
University of Colorado and IZA
Yoram Weiss
Affiliation:
Tel Aviv University and IZA
*
Corresponding author: Pierre-Andre Chiappori, Economics Department, Columbia University, 1009A International Affairs Building, MC 3308, 420 West 118th Street, New York, NY 10027. Email: [email protected]. Phone: (212) 854-6369. Fax: (212) 854-8059.
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Abstract:

We reconsider the well-known Becker–Coase (BC) theorem according to which changes in divorce law should not affect divorce rates. We do that in a context of households that consume public goods in addition to private goods. For the Becker–Coase theorem to hold in this setting, utility must be transferable both within marriage and upon divorce, and the marginal rate of substitution between public and private consumption needs to be invariant in marital status. We show that if divorce alters the way some goods are consumed (either because some goods that are public in marriage become private in divorce or because divorce affects either the marginal rate of substitution between public and private goods or even the cardinalization of a spouse’s utility), then the Becker–Coase theorem holds only for very specific preferences. We conclude that, in general, divorce laws will influence the divorce rate, although the impact of a change in divorce laws can go in either direction.

Type
Research Papers
Information
Journal of Demographic Economics , Volume 81 , Issue 2 , June 2015 , pp. 157 - 177
Copyright
Copyright © Université catholique de Louvain 2015 

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