New Economics Papers
on Law and Economics
Issue of 2013‒03‒30
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Divorce Laws and Divorce Rate in the U.S. By Stefania Marcassa
  2. Using Eminent Domain to Write-Down Mortgages: An Economic Analysis By Thomas J. Miceli; Katherine A. Pancak
  3. Does Custody Law Affect Family Behavior In and Out of Marriage? By Rene Böheim; Marco Francesconi; Martin Halla

  1. By: Stefania Marcassa (THEMA, Universite de Cergy-Pontoise and THEMA)
    Abstract: At the end of 1960s, the U.S. divorce law underwent major changes and the divorce rate almost doubled in all of the states. This paper shows that changes in property division, alimony transfers,and child custody assignments account for a substantial share of the increase in the divorce rate,especially for young, college educated couples with children. I solve and calibrate a model where agents make decisions on their marital status, savings, and labor supply. Under the new financial settlements, divorced men gain from a higher share of property, while women gain from an increase in alimony and child support transfers. The introduction of the unilateral decision to divorce haslimited effects.
    Keywords: Age-specific divorce rate, unilateral and consensual divorce, divorce laws, property division, alimony and child support, child custody
    JEL: J12 D13 K36
    Date: 2013
  2. By: Thomas J. Miceli (University of Connecticut); Katherine A. Pancak (University of Connecticut)
    Abstract: A handful of economically distressed cities and counties are considering using their power of eminent domain to write down the principal of underwater mortgage loans. Analogous to the condemnation of tangible real estate for public use, the city would “take” intangible mortgage loans from the lenders or investors holding the loans. According to the proposed idea, the underwater mortgage loans would be acquired for less than their stated face value, and then written down, refinanced, and sold to investors. This article reviews the legal basis and economic impact of such government forced write-down and refinancing. We develop a model of negative equity mortgage default both with and without government takings, to determine if the use of eminent domain is socially desirable from a policy perspective. We find a trade-off between the immediate benefits of avoiding current mortgage defaults and longer term costs of increased interest rates. The weighting of this trade-off is impacted by the determination of just compensation.
    Keywords: Default, eminent domain, mortgages
    JEL: K11 R31 R38
    Date: 2013–03
  3. By: Rene Böheim (Department of Economics, University of Linz); Marco Francesconi (Department of Economics, University of Essex); Martin Halla (Department of Economics, Vienna University of Economics and Business)
    Abstract: We examine the effect of joint custody on marriage, divorce, fertility and female employment in Austria using individual-level administrative data, covering the entire population. We also use unique data obtained from court records to analyze the effect on post-divorce outcomes. Our estimates show that joint custody significantly reduces divorce and female employment rates, significantly increases marriage and marital birth rates, and leads to a substantial increase in the total money transfer received by mothers after divorce. We interpret these results as evidence against Becker-Coase bargains and in support of a mechanism driven by a resource redistribution that favors men giving them greater incentives to invest in marriage specific capital.
    Keywords: Divorce, Fertility, Bargaining, Intrahousehold Allocations, Austria
    JEL: J12 J13 J18 K36 N32 R2
    Date: 2013–02

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