Divorce, Remarriage, and Welfare: A General Equilibrium Approach

Abstract

Modern marriage markets display increasing turnover, with less marriage but more divorce and remarriage. As a consequence, a large number of children live in single-parent and step-parent households. We summarize here a general equilibrium approach that allows welfare evaluations. In the absence of children, we show that higher aggregate divorce may raise welfare, because it facilitates remarriage. Even children may be better off in a high divorce-remarriage environment, because of stronger incentives for fathers to transfer money to the custodial mothers. (JEL: J1, J12, J13, K1, K10)