DIVORCE AND THE OPTION VALUE OF MARITAL SEARCH

Valerio Filoso

Metroeconomica, 2009, vol. 60, issue 1, 119-149

Abstract: This work tests whether the introduction of divorce law changes the timing of marital search. Rational agents should adjust to the divorce risk by increasing the average search spell, whereas option value theory stresses the role of irreversible investments: in this case, the new exit option should result in shorter spells. Using a dynamic model of marital search, a new data set of retrospective individual Italian data, and two robust statistical specifications, 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.

Date: 2009
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https://doi.org/10.1111/j.1467-999X.2008.00329.x

Related works:
Working Paper: Divorce and the Option Value of Marital Search (2007)
Working Paper: Divorce and the Option Value of Marital Search (2007)
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