OTMS

Divorce, Remarriage, and Fertility with on-the-marriage search

Even with falling divorce rates, between 30 and 40 percent of new marriages end in divorce. Recent divorcees – especially men but increasingly also women – tend to remarry very quickly. To the extent that marriage provides consumption insurance, and security to undertake costly investments such as raising children, the phenomenon of divorce and rapid remarriage prompts re-examination of the gains to marriage in terms of risk sharing. This paper explores marriage and divorce when individuals can engage in on-the-marriage search. Introducing on-the-marriage search allows us to match the rapid remarriage rates seen in US microdata as well as to explore the connections between infidelity, divorce, and remarriage that have attracted much attention in the sociology literature. In a second-best contracting world, the ability to search on the marriage (OTMS) has ambiguous and potentially important implications for the marriage as a consumption smoothing device and as a platform for making investments in children. We find that allowing for OTMS has variable effects on the first and second moments of consumption for different parts of the population, with women slightly worse off and men slightly better off when OTMS is allowed. Perhaps counterintuitively, OTMS also has a positive effect on fertility because it increases the attractiveness of having children for men in mediocre marriages.

https://www.economics.utoronto.ca/lturner/OTMS.pdf