The Economics of Marriage and Divorce - Research Paper Example

 The Economics of Marriage and Divorce Introduction The usual reasons cited why two people enter into marriage or break up into a divorce are love, sex, children or money. However economists claim that these decisions are a lot to do with economics and how it affects people in taking decisions relating to marriage or divorce. Prior to 1970, both the husband and wife needed to agree to a divorce. However the current law makes it possible for one party to initiate divorce proceeding. This has also lead to the way the resources would be shared by the couple post divorce. To study how economics affects the decisions relating to marriage and divorce, it is necessary to study the model of marriage and the reasons why people marry. Going further, the paper shall discuss how economics affects decision making during the married period or the period leading into a divorce. Trends The table above shows the trends in marriage and divorce rates in US per 1000 people. It clearly shows that marriage rates have gone up and down cyclically while the divorce rates have shown a steady increase. Source: Trends in marriage and divorce, Friedberg Leora & Stern Steven, 2003 Data in the 60’s show that while divorce rate was 2.5 per thousand, in the 80’s it shot up to 5.2 per 1000. (Friedberg Leora & Stern Steven, 2003) This has now come down and in 2005 it showed 3.6 divorces per thousand people. Data also reveals that in 1880, 75% of married people stayed together with their children which reduced to 41% in 2005. ( Wolfers Justin & Stevenson Betsey, 2007)1 However the graph does not provide an accurate analysis of the current marriage rate since there have been a significant percentage of live-in relationships that have increased over the past decade. Marriage Marriages unlike live-in relationships have a contractual obligation that is rendered to the husband and wife by the state or by the priest who is presiding over the occasion. While some marriage functions have limited obligations that are spelled out by the priest, there are others that might require the couple to state what would be their conduct towards each other. Just like a contract, other terms would include how the money would be inherited to either couple in the event of a death or divorce and how much financial support would be provided if there is a child involved. (Dnes Antony & Rowthorn Robert, 2002) Just like in economics, where money plays an important role in making decisions, there are traditions in the Hindu culture of India that promote taking of dowry or the wealth that the bride would bring along when she would be legally wedded to the husband. Other Islamic cultures have a custom called ‘Maher’ which involves paying a token amount to father of the bride. Although these had initially begun as small amounts, the sums off late have assumed gigantic proportions with lot of bargaining that would go into finalising a marriage deal. It is not just whether the couple have liked each other but what would this marriage bring to the table which is a more severe constraint. There are economics involved in love marriages also as conducting a memorable marriage of one’s choice is a huge burden. While in an arranged marriage, one is concerned that a frugal wedding would be loss of public status; in a love marriage both are eager to conduct a lavish ceremony to show their affection. Since such huge costs are involved, couples are wary of going for divorce after such large initial financial investments. Certain churches also forbid going for a divorce while some countries place a huge onus on the husband to provide financial support which checks in some way of going for a divorce over trivial means. (Friedberg Leora & Stern Steven, 2003) Here economics has played its part in making the husband come to a decision. Marriage While increasing ones utility level on marrying is most common theory proposed it has also been found out that men and women in most cases try to find the best bet from the existing marriage market. (Becker Gary, 1974) Apart from the financial aspect to it which was also explained earlier, marriage is the only contract that allows couples to engage in legal sex. Marriage therefore increases monogamy since people are wary of the diseases that can come about on having unsafe sex. This may also lead to cases of unwanted pregnancies with child support that might have to be provided if the case becomes legal. These prospects which have direct financial implications therefore make couples enter to a marriage agreement. However the advent of the birth control pill for women which enables them to control pregnancy has also encouraged them to go for co-habitation prior to marriage.2 Children are the by-product of sex. Some parents have children because they feel the need to have that connect with a child; others have it due a more biological need where they feel the need to carry forward their lineage. Explaining in terms of economics, children add a utility value to marriage as the time spent by the parents increase their perception of value addition. (Browning Martin & Chiappori Pierre-Andre, 2011) Other aspect of child rearing includes the notion that if time was to be invested in bringing up the child, it might be a good investment since the child might care for them in their old age. This feeling also has financial implications. Having kids also increase the emotional connect between parents and both are willing to walk that extra mile to make the marriage work. Purely in terms of economics if husband and wife were to stay separated, it would mean individual expenses for rent, air conditioning, and electricity and water bills. Thus, remaining in the family would mean that the same amount would cater to the needs of all involved. Hence it is economic sense for the concerned parties to stay married. (Friedberg Leora & Stern Steven, 2003) Household production is an aspect of marriage that has implications to the parents though not in the true economic sense. This relates to a concept of providing time for one’s family whether by cleaning the household or investing time in looking after the kids. It increases the utility value of the parent as a clean household or a well mannered smart kid raises their utility in the public perception. (Becker Gary, 1974) Usually one of the parents might be working while the other takes care of the house and the child. Sometimes both the parents might be working with the baby being cared by a nanny. Alimony settlements in the first case are higher since it can be argued that the wife had sacrificed a fully fledged career to take of the home. Decision making Economics to a large extent is the judicial use of scarce resources like money, time to maximise your utility or personal satisfaction. Therefore principles of economics can be applied directly in cases where a family might have a certain amount of money but have varied choices on how to spend it. (Manser, Marilyn and Brown Murray, 1980) While one of the partners may want to spend it on jewellery, the other might want to spend it on a mobile gadget. Sometimes the decision might be to spend it on the child while the other person might want to save it for a future investment. Time is also an important aspect with the parent spending it either at the worksite earning a daily wage or the wife spending it at home. Both these investments in time add utility to the individual and the family as a whole. Studies have shown that an economic decision is not dependent on who is the earning member of the family. However there is a definite change in the proportion of items purchased in families which had the male as the earning member and in families where the wife also supplemented the family income. (Goldin, Claudia & Lawrence Katz, 1995) The game theory principles of economics can be applied to the way family members bargain with each other to arrive at a decision. It explains that for the husband wife duo, identified by i and j; Ri & Rj would be the utility that individual i & j derives from staying in a relationship. Si & Sj would be the utility that the individuals i & j derive while staying solo. It states that as long as the sum of Ri+Rj-Si-Sj> 0, the marriage shall stay alive ie the utility from staying married together should exceed the utility from staying single. (Nash John, 1950) Si & Sj varies with the bargaining power of individuals i & j. There are examples where an individual, say i might have lowered their bargaining if they feel that this would lead to a breakup which might make i more lonelier. Individuals who have lot of other interests and are usually attracted by the opposite sex also might stake a higher bargaining power. (Nash John, 1950) Sometimes the women who are not the earning member might lower her bargaining power for a certain lack of self esteem since the tangible money is actually being provided by the husband. Couples are suspicious that savings in the future might be used to purchase a certain material that would be to the satisfaction of only one individual. Hence the tendency is to spend all of the money on buying items that would in the event of a divorce be divided between the partners. ( Pollak Robert, 1985) The increase of divorces in US has also therefore contributed to lack of savings among American households. The transition point This is point in a relationship at which the couple decides to marry and take their relationship forward. As discussed earlier, Rm & Sm are the value to the male staying in a relationship and staying single respectively while Rf & Sf are the notations for female. The relationship will only sustain if (Rm+Rf)-(Sm+Sf)>=0 i.e the value while staying together should be greater than the value while remaining single. To explain a case further if the male wants to stay in relationship while the female wants to break up, it can be denoted by Rm-Sm>0 while Rf-Sf 0. (Nash John, 1950) 3Therefore the contribution from the male partner has increased the interest of the female to stay in the relationship. The contribution ‘p’ need not be monetary but may include small tasks like helping in household activities, going to the market, congratulating her effort, appreciating the food or spending time with kids. Breaking up Explaining in terms of economics, the marriage would breakup when (Rm+Rf)-(Sm+Sf) Read More