Untying the Knot : Divorce Legalization and the Decline of Marriage

Overview & Synopsis

This study investigates the impact of divorce legalization on marriage decisions and intra-household specialization using Chile’s 2004 reform as a case study. Opponents feared that introducing divorce would weaken the commitment value of marriage. Instead, the study documents a reversal of sharply declining trends in marriage rates, marital fertility, and the choice of the community property marriage regime in the 15 years following the law. These effects were most pronounced among highly educated women. The study hypothesizes that the introduction of legal divorce with equal division of marital assets allowed husbands to insure homemakers against the economic risks of informal marital separation, thereby incentivizing specialization and fertility. In support of this mechanism, the study shows that the law caused a large reduction in the labor supply of young women married before the law under community property compared to those married under asset separation, who were not affected by equal asset division. Furthermore, the findings show that the concentration of these effects among the highly educated is driven by their higher levels of household assets, as predicted by simulations from a limited-commitment, collective model of marital investment.