Long Term Contracts:Family Law Why Have Long-term Contracts? Why not handle everything as a spot market? In some relationships,partners acquire relationship specific skills Converting a competitive market to a bilateral monopoly The case for traditional marriage Eliminating the option of threatening to leave reduces some bargaining costs Social customs on the division of responsibilities reduces others At the risk of being stuck with a wrong choice or a wrong division And you cannot enforce contract terms that are not observable
Long Term Contracts: Family Law • Why Have Long-term Contracts? • Why not handle everything as a spot market? • In some relationships, partners acquire relationship specific skills • Converting a competitive market to a bilateral monopoly • The case for traditional marriage • Eliminating the option of threatening to leave reduces some bargaining costs • Social customs on the division of responsibilities reduces others • At the risk of being stuck with a wrong choice or a wrong division • And you cannot enforce contract terms that are not observable
Changes Over the Past Century+ 。Divorce Used to be legally difficult and uncommon ·Is now easy and common Most couples had a sexual division of labor Husband worked outside the home for income Wife ran the household Most adults were part of a husband-wife couple,now about half Almost all children were born in wedlock 1940 U.S.Illegitimacy rate about 4% ·1999ab0ut33%
Changes Over the Past Century+ • Divorce • Used to be legally difficult and uncommon • Is now easy and common • Most couples had a sexual division of labor • Husband worked outside the home for income • Wife ran the household • Most adults were part of a husband-wife couple, now about half • Almost all children were born in wedlock • 1940 U.S. Illegitimacy rate about 4% • 1999 about 33%
Why did these changes happen? Housewife ceased to be a full time job because Infant mortality rates dropped A lot of household production moved out of the house Since women were less specialized to being the wife of a particular man The costs of ending a marriage,while still substantial,were smaller So less incentive to make and keep long term contracts
Why did these changes happen? • Housewife ceased to be a full time job because • Infant mortality rates dropped • A lot of household production moved out of the house • Since women were less specialized to being the wife of a particular man • The costs of ending a marriage, while still substantial, were smaller • So less incentive to make and keep long term contracts
Consequences of Easy Divorce Consider a long term contract in which A performs early,B late If the contract is not enforceable A performs and B breaches. Opportunistic breach,not efficient breach In a traditional marriage,the wife performs early,the husband late Producing and rearing children is the hard part of the wife's job The husband's income usually rises over time So with easy divorce,some husbands breach opportunistically Once people adjust,how would women rationally respond? Specialize less in being a wife,more in market skills Postpone and spread out childbearing Be less likely to marry at all
Consequences of Easy Divorce • Consider a long term contract in which A performs early, B late • If the contract is not enforceable • A performs and B breaches. • Opportunistic breach, not efficient breach • In a traditional marriage, the wife performs early, the husband late • Producing and rearing children is the hard part of the wife’s job • The husband’s income usually rises over time • So with easy divorce, some husbands breach opportunistically • Once people adjust, how would women rationally respond? • Specialize less in being a wife, more in market skills • Postpone and spread out childbearing • Be less likely to marry at all
Out-of-Wedlock Births:Possible Explanations Welfare for single mothers made single motherhood more viable Increasing acceptability of non-marriage equivalents A surplus of women on the marriage market relative to the past Because women now hardly ever die in childbirth In 1900,~1 of births resulted in death for the mother,and women had a lot of children In a richer world,more women who didn't want a husband could do without one
Out-of-Wedlock Births: Possible Explanations • Welfare for single mothers made single motherhood more viable • Increasing acceptability of non-marriage equivalents • A surplus of women on the marriage market relative to the past • Because women now hardly ever die in childbirth • In 1900, ~1 % of births resulted in death for the mother, and women had a lot of children • In a richer world, more women who didn’t want a husband could do without one