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DIVORCE AND THE OPTION VALUE OF MARITAL SEARCH
Author(s) -
Filoso Valerio
Publication year - 2009
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2008.00329.x
Subject(s) - spell , matching (statistics) , economics , work (physics) , set (abstract data type) , value (mathematics) , marital status , actuarial science , computer science , sociology , demography , mathematics , statistics , engineering , mechanical engineering , population , anthropology , programming language
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.