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Divorce And The Option Value Of Marital Search

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  • Valerio Filoso

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.

Suggested Citation

  • Valerio Filoso, 2009. "Divorce And The Option Value Of Marital Search," Metroeconomica, Wiley Blackwell, vol. 60(1), pages 119-149, February.
    • Handle: RePEc:bla:metroe:v:60:y:2009:i:1:p:119-149
    DOI: 10.1111/j.1467-999X.2008.00329.x
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    More about this item

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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