Effects of Marriage, Divorce and Child Custody on Utility Changes - Coursework Example

Introduction

It is critical to ask why people get married. People get married mainly for love, sex, money, and children. These are also the same reasons why people get divorced. For this reasons, economists have developed various theories and hypothesis to explain various financial aspects associated with marriage and divorce. Importance changes in life after marriage or a divorce can be explained using economic principles. This paper will look at the effects of marriage, divorce, and child custody on an individual’s utility using economic principles and model to examine these changes. Specifically, the paper will use matching models to explain what changes in an individual’s utility when they either get married or divorced. It is hypothesized in the paper that marriage and divorce will affect an individual's utility. During separation or divorce, issues of custody often arise because the quality of the children has to be maintained. Laws have been developed by different states that determine custodial rights based on the fact that the interests of the children have to be prioritized. From an economic perspective, one may want to know changes occur when an individual has custody of the kids. Does the utility curve shift upwards or downwards? It is hypothesized in this paper that the economic utility of the parent with custodial rights will shift downwards because the parent will incur financial and non-financial while taking care of the kids. The paper will also compare findings from other researchers concerning the effects of marriage, divorce and child custody on people’s utility.

Effects of marriage and divorce on utility changes

It is interesting to study the role of marriage and divorce on people’s utility given the high number of divorce cases that characterize the today’s society. This paper will explore the effects of marriage and divorce on an individual’s utility based on the matching model proposed by Choo and Siow (2005), Marriage is associated with various benefits that are expected to change when the couples divorce. Some of the benefits associated with marriage include love, sex, children and money (Friedberg, 2003)

Marriage consists of various forms of benefits that include sharing of consumption goods. Non-monetary benefits in the form of companionship and love are also associated with marriage. Since marriage is an experience good the quality of the match between the two individuals is realized after sometimes characterized by lag. Whenever there are negative surprises between the two people, the quality of the match reduce and thus triggering the divorce. It has been hypothesized by several authors such as Friedberg, Choo, and Siow that marriage and divorce play a critical role in people's utilities. It is the major aim of the paper to explore how marriage and utility affects people's utility. This will be done by examining the benefits associated with marriage from an economic perspective. The impacts of each of the benefits associated with marriage affect an individual’s utility based on whether the couple decides to get married instead of cohabiting together.

Love and sex

How do love and sex become a factor in determining an individual’s utility in marriage or divorce? According to the Matching model postulated by Chow & Siow, love is considered as a simple gain in utility because an individual gain from sharing his or her love with another person. Love is a utility function given the fact that it may change an individual’s utility function by adding weight to the utility of another person. From an economic modeling point of view, sex is indifferent from love because it also offers utility, particularly when there is a positive match in partners. Sex may only complement love if emotional intimacy among the two people enhances sexual satisfaction. Therefore, love and sex are gains in utility that an individual experiences as opposed to divorce when the person is detached from his or her partner.

Children

Children are often a byproduct of sex. Besides, people have kids because they make an individual developed a good feeling that he or she is a biological imperative. People also enjoy having kids. The fact that people enjoy having children and feel biologically imperative makes children one of the things that raise a person’s utility. Children are considered public goods because they raise the utility of both parents at the same time. Marriage ensures that an individual’s utility is maintained because it allows both parents to spend time with their children. The raising of kids will virtually cost the same whether the kids stay with one parent or both. Therefore, it is advantageous and efficient for the children to stay with both parents. Love, sex, and kids all offer a rise in utility when an individual is in marriage as opposed to divorce. As such, the utility curve will demonstrate a positive shift when people get married and move downwards when people are divorced because the factors that cause a gain in utility are deprived. These factors are the individual utility gain from marriage

Divorce

Consider a couple who are together in a relationship- meaning the total net value of the relationship at the time they were forming the relationship was positive. All the utilities were positive during the time the two were forming the relationship. If the total net value of the relationship is still positive after some time together, the couple may renegotiate the relationship and chooses to remain together. However, for some reason, if the utility curve falls negatively, and there is a net negative value in the relationship whereby both members are well off on their own, the relationship ends. A couple will not break up if nothing in the relationship is changing and the utilities are positive.

This form of bargaining was described by Choo & Siow, who assumed that transitions in and out of marriage are efficient. This means that a couple forms a relationship that may lead to marriage only if the net value of the relationship is positive. They divorce only if the net value of the relationship is negative. To understand the effects of marriage or divorce on an individual's utility changes, we have to examine an economic model that will allow the analysis of the changes in utility over time from marriage. This paper will analyze the marriage and divorce dynamics from an economic perspective by using the matching model similar to the model developed by Choo & Siow (2005). For people to get married, there has to be a match between the two individuals.

Consider a couple getting into a relationship. Let us assume the value for the male party to get into the relationship is Rm and the value for the male to be separate is Rs. We can also assume that the value for the female to get into the relationship is Rf and being separate is Sf. In this case, R denotes the various values or benefits of getting into the marriage relationship such as love, sex, money, and children while S denotes the cost of loneliness, value for the extra privacy of being alone and independence. While in marriage, an individual does not need to worry about incurring the costs of forming the new relationship tomorrow. In a marriage, it can also be assumed that both the male and female parties understand the values of Rm, Sm, Rf and Sf. Therefore, the formation of the marriage will occur when the gains in form of utilities exceed the losses associated with marriage as illustrated in the model:

(Rm+Rf)-(Sm-Sf) = R-S≥0

If for example the male partner wants to remain in the relationship, the model will change such that:

Rm-Sm>0>Rf-Sf

Based on this model, marriage will occur when the total value of the couple forming the relationship is greater than when they are separated. This relates to the factors that result in utility gain discussed earlier. When the utility curve shifts positively, both the male and the female counterparts are comfortable being in the marriage. This model is similar to the relationship formation model proposed by Becker (1981) that says a relationship will occur only if the positive gains outweigh the negative losses of being single. Therefore, whether the decision to be married versus the decision to remain single will significantly affect an individual’s utility. The Becker model introduces an aspect of side payment that determines whether the individuals will remain in the marriage or not. Becker refers to side payment and the price each is willing to pay for the relationship to stand. Divorce will only come when there is no side payment, and the total net value of the relationship is negative. In the case where a marriage exists a match is said to exist between the two individuals such that the utilities associated with marriage are positive.

The findings and conclusions in this model coincide with the conclusions reached by Friedberg & Stern (2003) concerning marriage and divorce from an economic perspective in the sense that marriage will only occur in the cases where there are positive gains in utility while the divorce is a result of negative net values of the relationship. However, the authors further argue that the utilities in marriage not only come from the gains of sharing love but also relate to the way the couple share more, time and depend on the bargaining power of each spouse in the relationship. Similar equilibrium models analyze marriage from an equilibrium framework whereby intrahousehold allocations are controlled by competitive constraints on the marriage market. Some of these models present the role of women as mainly to produce children while men employ women to produce kids. This perspective allows marriage to be analyzed from an employment relationship that can allow the application of labor economics.

The developed model illustrated the utility changes that occur in marriage or divorce. The potential gains from marriage illustrated the gains in utility for a person. Most of these gains are not only emotional but also the effective use of time and other resources while the people are living together. Conflicts may arise from several sources that may force spouses to act in concert to maximize the family utility function. These factors include the allocation of finances to various private goods consumed by the individual spouses as well as the public marital goods they enjoy simultaneously while living together. Allocation of time between working in the market, household production and personal leisure may also affect an individual's utility. It can be assumed that individuals maximize the gain in utility from making family decisions restricted by a particular budget. When together individuals make decisions as a family thus improving the family utility function.

If the decision making is not made as a unit, then the perspective changes to individual decision making that is characteristic of divorce. Being in marriage still changes the way decisions ae made because control over resources are shared and one’s actions are affected by other family members. The game theory can help us understand the dynamics of family decision making in the context of its effects on the utility of the family members. To understand the gains from decisions making as a precursor of utility, we will use Ri to refer to the utility a person gains from cooperative bargaining in marriage, and Si as the utility that the person gets from being alone. Individual i is the male spouse, and individual j is the female. Ri is the gains in utility from marriage due to the presence of factors such as love, sex, money, and children. As long as the spouse can split their economic surplus, Ri+Rj-Si-Sj, from marriage, the two spouses will remain together. If there is no cooperation between the two spouses, the best scenario that will occur is for the spouses to get utilities Si and Sj from separating. As Friedberg & Stern (2003) point out, the danger of cooperative bargaining models is that individual often prefers getting S rather than staying in the marriage. The bargaining values of the partners determines the division of the surplus, hence the actual values of Ri and Rj.

Rather than look at the effects of marriage or divorce on utility changes, Choo & Siow (2005) used a static transferable utility model in the marriage market to understand why a particular person will choose to marry another person in the society. The model the two researchers used generated non-parametric marriage functions that demonstrated spill-over effects. The model was also used to show the gains in marriage. He authors found that the rates of marriage among young adults substantially declined in the US over the decade between 1971 and 1982. Unlike the model used in this paper that showed that people will divorce when there are negative shifts in marriage gains, the researchers argued that the legalization of abortion played a critical role in the fall in gains associated with marriage, particularly for young males and females. Since people were able to abort freely, there was no importance of having children together. As illustrated earlier, children are a public good that ensures gains in utility when spouse are married. In the cases where there is abortion, there is no use of children as leverage for maintaining the gains in marriage.

Effects of child custody on utility changes

The issue of child custody after parents separate or divorce has been a complex issue in most societies. Usually after a divorce or separation, the court decides on who to have custody of the children. The custodial rights are often given to the person who it is assumed will give good care to the children. Based on the different laws of different areas, child custody rights can be given to either the mother of the father.

Based on the analysis by most economists, child custody is viewed as a public good whereby both parents have equal heterogeneous valuations of child quality of life. The allocation of the child after parents separate or divorce affects the magnitude of martial surplus that each parent can appropriate. According to Rasul (2006), child custody affects the utility of both spouses. If the custody is sole custody, the parent taking care of the child may incur additional costs associated with taking care of the child thus a negative shift in utility. The same utility curve may also shift downwards in cases where one of the parents offers financial support to the child as a legislative directive through salary deductions or any other form of deductions. Thus, child custody has both distributional and efficiency effects of marriage.

For this discussion, children will be regarded as public goods. Under child custody, the utility of the parent may vary depending on the regime. If the utility of the child is different under the sole and joint custody each in the situation is in a better position in the custodial regime. In cases where the mother has sole custody of the child and assume the joint custody of both parents would increase the child’s utility, then the utility of the father would improve when the child is under joint custody. If the mother has sole custody of the child and the child is between choosing either joint or sole custody, changing from sole to joint custody would improve the utility of the father. The mother, in this case, would have a negative shift in utility.

These same results were reported by Bearance (1999) who found that joint custody had a positive shift in the utilities and welfare of both parents but decreased the welfare of the child. However, the study by Bearance used different assumptions for preferences. Custody means a negative shift in utilities for the parents because according to some models, custody means that there is less income or money available for the individual. If both parents contribute to the child’s welfare before the change, both the custodial parent and the child would be in a good position. Under sole custody, whereby the father spends nothing on the child’s welfare, a slight change in the welfare of the child strongly depends on the income of the mother. However, in most legal cases that rule for the mother having sole custody, the removal of tax on received payments ensures that most of the family income are in the hands of the mother thus increasing her utility as well as the utility of the child.

This particular situation remains the same even if the tax switch is followed by a reduction in support payments that are meant for the compensation of the non-custodial spouse for a greater tax burden. As long as the mother’s income after tax is higher than when she was eligible for this particular part of the family income, her utility is expected to rise in the new sole custody regime.

However, the situation may play out differently under joint custody. Joint custody is often seen as a situation where the rights and obligations of the parents to the child are more compared to sole custody. When in a divorce, the rate of return to child-investments is greater on the custodian compared to the noncustodial's rate. To understand the effects of joint custody in the parents’ utility changes, it is critical to assume that the utility of these parents depends on the welfare of the children. In a natural setting, the parents are often interested in the good welfare of their children, and they always want to spend more time with the children. Parents also mostly want to remain the custodians after divorce. Household decisions made by the spouses that result in separation and child custody issues affects their utilities. Most scholars argue that the household decisions made by spouses when in marriage often result in positive outcome for both the parents and the kids. However, the decisions to allocate financial assistance to take care of the custody may also depend on the incomes, ages, and lifetime wealth of the spouses (Browing, Chiappori, & Lechene, 1994)

There are many cost effects that may change the incentive to marry or divorce. The option of whether to have sole or joint custody may play a critical in the expected utility when an individual is married or divorced and consequently affects the divorce decision of existing marriages. We can first start by assuming that both parents prefer to have sole custodian than joint custodian. If one switches from a sole custody regime that has a maternal preference to a joint custody, the utility is expected to increase in joint custody for men and reduce for women. In a case of some custody regime with paternal preference reverse effects are expected. In a case where both parents want to have joint custody the urge to divorce clearly increases. (Halla, 2009)Custody may also gave behavioral effects on the parents after the divorce. The availability of joint custody may have a positive impact on the parents urge to invest in the kid especially with regards to marital related investments.

Since child care during custody needs more financial supports from the custodian parent, the utility for the parent will shift down. People who carry children will put more costs, time, and energy to care for the children. Time, costs, and energy are some of the factors that determine an individual’s utility in a relationship such as marriage. Therefore, when there is separation or divorce, custodial rights change as the children will either live with the father or the mother. In such a case, the utility for both parents will be affected by the custody as explained.

Allocation of household resource

The allocation of household resources becomes critical to the utility function because it determines the financial budgets of the parents. Under the different household structures, the allocation of resources may either result in a gain or loss in utility. In an intact family, resources are allocated in a manner that will result in maximum benefit for both spouses in maximizing their common utility. However this changes when the spouses are separated. If the mother remains with custody of the kids, she may spend all her resources when raising the kids. The mother utility may change when the mother chooses to remarry. However, remarriage may become complex to understand because the new husband received no or little gains from spending the child well. In such cases, the children are a private good for the mother and may affect her utility since the new father received no utility from these children. According to the model developed by Chiappori & Weiss (2004), the utility gain of the mother upon remarriage will include additional adult good and will be affected by the change in utility from expenditures she spends on the children. In the model, the decision to get divorced or remain in marriage depended on the probability of the spouses to be remarried which, it turn may be affected by other people outside the marriage.

Conclusion

Developing a model to understand the effects of marriage, divorce and custody on an individual’s utility has been problematic for most economists. It is clear though that a person’s utility changes in these three circumstances. Finding the right model to illustrate and predict the effects of marriage and divorce on utility should be at the center of economic research. This paper has made an attempt to understand changes in utility when there is a marriage or a divorce. The potential gains from marriage such as love, sex, and children are often the main factors that result in a gain in utility in marriage. These means that outside marriage it is a fall in utility is expected love and sex can add the utility of person in marriage. This means that a lack of these issues that is characteristic of divorce will often result in a loss in utility for the affected parents. Children are critical to an individual’s gain in utility because they offer some sense of satisfaction. While in marriage, people become happy and satisfied with their kids thus an increase in utility. Therefore, it becomes beneficial for both spouses to remain in marriage because marriage will offer the spouses an opportunity to share the factors that result in again in utility. On the contrary, it is expected that divorce will result in a negative shift in utility as the factors that cause satisfaction while the spouses were still in marriage are now lacking. According to the model explained in the paper, Divorce only occurs when the net value of the marriage is negative and the spouses are having negative shifts in utility. However, if nothing is not changing in the relationship and the utility functions remain positive, chances of divorce are not there. It is evident that marriage and divorce demonstrates opposing effects on the utility changes of the spouses. Marriage will result in a positive change in the spouses’ utility while divorce will cause a negative changes in utility. Child custody often arises when the spouses are separated or divorce. As such, child custody may also have effects on the utility of the spouses depending on who has the custodial rights. It is expected that the parent having custodial rights will experience negative shifts in the utility function because of the increased expenditure in taking care of the children. However in case where there are joint custody, the changes in the utility function are minimal.