Partnership Dissolution Research Articles

Dissolving (In)Effective Partnerships

This paper studies the problem of partnership dissolution in the context of asymmetric information. Past work shows that the initial share allocation, interdependence of partners’ valuations, and asymmetric control all affect the possibility of efficient dissolution. In this paper, I show, in a novel class of “cooperative” partnerships characterized by ex ante interdependence of valuations, that effectiveness is significantly more important than the initial share allocation. Intuitively, as the effectiveness of cooperation between partners (and thus partnership value) increases, the gains from dissolving decrease but the informational rents remain constant, so efficient dissolution is more difficult to achieve. For sufficiently high effectiveness, efficient dissolution is impossible for any initial share allocation. For sufficiently low effectiveness, however, efficient dissolution is possible for all initial share allocations. The possibility of efficient bargaining depends on the initial share allocation only for moderately effective partnerships.

The influence of formal and informal support systems on the labour supply of divorced mothers

ABSTRACTIn this article, we evaluate the effect of both formal and informal childcare support systems on the post-divorce labour supply of divorced mothers. To this end, we model the change in working hours before and after divorce by using a multilevel approach, estimating the impact of both micro- and macro-level determinants. Although we find empirical evidence for the hypothesis that a country's institutional environment plays an important role in facilitating employment as a strategy for mothers to cope with their financial losses following partnership dissolution, our conclusion is that the change in labour supply is more responsive to the whole of a country's family policies rather than to so-called ‘domain-specific’ indicators of formal and informal childcare provision. Furthermore, our empirical evidence suggests that at the micro-level, formal and informal childcare strategies are connected. The complementary role of informal support systems, facilitating the use of formal childcare, is an important finding from a policy point of view. However, further research will have to make clear which conditions have to be fulfilled in order to help divorced mothers to combine work and care, thus enabling them to mitigate the economic consequences of partnership dissolution.

The long-term consequences of partnership dissolution for support in later life in the United Kingdom

ABSTRACTThere has long been an interest in the United Kingdom about whether and how changes in family life affect support for older people, but nevertheless the consequences of partnership dissolution for late-life support have been little researched. Using data from the British Household Panel Study (1991–2003), this study investigated the longitudinal association between partnership dissolution and two types of support for 1,966 people aged 70 or more years: (i) informal support from children in the form of contacts and help (e.g. household assistance including care), and (ii) formal support from community care services (i.e. health visitor or district nurse, home-help and meals-on-wheels). The paper also examines the level of reported support among: (i) all parents aged 70 or more years and (ii) 1,453 unpartnered parents in the same age group (i.e. those lacking the most important source of support in later life: a spouse). We found diversity in the experience of partnership dissolution in the past lives of people aged 70 or more years. Patterns of support varied by the respondent's age, whether partnered, the timing and type of partnership dissolution, and by gender, having a daughter and health status. Overall, however, partnership dissolution did not show the expected detrimental relationship with later-life support. Health needs and increasing age were strongly associated with increases in contact and informal and formal help, regardless of family history.

Efficient partnership dissolution under buy‐sell clauses

Buy‐sell clauses are commonly used contractual provisions to determine the terms of dissolution of partnerships. Under them, one party offers a price for the partnership and the other party chooses whether to sell her share or buy her partner's share at this price. We point out that the selection of the proposing partner is essential for the performance of the clause. Moreover, if partners negotiate for the advantage of being the chooser, then buy‐sell clauses result in an ex post efficient outcome. Such endogenous selection is consistent with how buy‐sell clauses are drafted in practice.

Efficient partnership dissolution under buy-sell clauses

Buy-sell clauses are commonly used contractual provisions to determine the terms of dissolution of partnerships. Under them, one party offers a price for the partnership and the other party chooses whether to sell her share or buy her partner's share at this price. We point out that the selection of the proposing partner is essential for the performance of the clause. Moreover, if partners negotiate for the advantage of being the chooser, then buy-sell clauses result in an ex post efficient outcome. Such endogenous selection is consistent with how buy-sell clauses are drafted in practice.

Flexibility, friendship, and family

AbstractThis article is concerned with the impact of late modernity on patterns of solidarity in friend and family relationships. It takes as its starting point the transformations in partnership, family, and household formation and dissolution that have been occurring in Western societies since the 1970s. Accepting these shifts as indicative of the greater freedoms people now have over the construction of their personal relationships and social networks, the article examines the degree to which the domains of family and friendship are merging. Its principal argument is that despite increased flexibility in the construction of personal life, including diversity in the prioritization of different relationships, at a cultural level clear boundaries exist between family and friendship ties.

Marriage, Divorce and Reciprocity‐based Cooperation

AbstractThis paper considers partnership formation, partnership dissolution and reciprocity‐based cooperation by couples in the form of voluntary transfers to smooth consumption. While risk sharing is one benefit of having a partner, it is also limited by the (endogenous) risk of separation. The equilibrium formation and dissolution of partnerships are determined simultaneously with cooperative behavior. Publicly provided earnings insurance is shown to increase the “turnover” rate in the marriage market as well as to reduce the steady‐state marriage rate and the implicit financial cooperation between partners.

Working Late

Abstract In this paper, I analyze the association between workplace sex ratios and partnership formation and dissolution. I find that the risk of dissolution increases with the fraction of coworkers of the opposite sex at both the female and male workplace. On the other hand, workplace sex ratios are not important for the overall transition rate from singlehood to partnership. The results suggest that the workplace constitutes a more important marriage market segment for individuals who are already in a partnership, presumably due to higher search cost for (alternative) partners in general.

Working Late: Do Workplace Sex Ratios Affect Partnership Formation and Dissolution?

In this paper, I analyse the association between workplace sex ratios and partnership formation and dissolution. I find that the risk of dissolution increases with the fraction of coworkers of the opposite sex at both the female and male workplace. On the other hand, workplace sex ratios are not important for the overall transition rate from singlehood to partnership. The results suggest that the workplace constitutes a more important marriage market segment for individuals who are already in a partnership presumably due to higher search cost for (alternative) partners in general.

The Economic Consequences of Partnership Dissolution--A Comparative Analysis of Panel Studies from Belgium, Germany, Great Britain, Italy, and Sweden

The paper analyses the economic consequences of partnership dissolution in different institutional settings. Belgium, Germany, Great Britain, Italy, and Sweden are selected as representatives of four prototypical models of family support (market model, extended family model, male breadwinner model, dual earner model). It is assumed that these four types of family support create specific dependencies within the family, which in case of separation or divorce may have negative economic consequences for the weaker partner. The central question is how much economic autonomy is granted to the weaker family members within each of the four models. Following a thorough discussion of the institutional setting in each of the selected countries, it is assumed that economic autonomy is highest in Sweden and lowest in Italy with Belgium, Germany, and Great Britain ranging in between. Using a cross-national data set of separations developed by the authors from national household panels in these five countries, a large number of partnership dissolutions are studied over time. The observation period is long enough to distinguish short-from long-term consequences of partnership dissolution and in doing so to add to previous comparative research. Using multivariate panel data models it is shown that (i) adjusted household income is affected for both genders; however more negatively for women than for men, (ii) the income decline is highest in Italy and lowest in Sweden, and (iii) British and German women recover rather quickly from the negative economic effects of separation. Sweden stands out as the country with the highest gender equalities with respect to post-separation incomes. However, the model does not convince without having a blemish: in the long run both Swedish men and women have to deal with long-lasting financial consequences after separation, which do not appear to the same extent in any of the other countries.

Partnership dissolution with interdependent values

We study partnership dissolution when valuations are interdependent and only one party is informed. In contrast with the case of private values (Cramton, Gibbons, and Klemperer, 1987), in which efficient trade is feasible whenever initial shares are about equal, there exists a wide class of situations in which full efficiency cannot be reached. In these cases, (i) the subsidy required to restore the first best is minimal when the entire ownership is allocated initially to one of the parties, and (ii) ruling out external subsidies, the second‐best welfare is maximized when one of the parties initially has full ownership.

Child Support and Partnership Dissolution

This article studies the determinants of partnership dissolution and focuses on the role of child support. We exploit the variation in child support liabilities and entitlements driven, in part, by the introduction of a new set of complex rules that determined child support liability in the UK, and by their interaction with welfare rules. Our panel has the virtue that the post 1993 variation in child support liability for all couples in partnerships formed prior to 1993 is unanticipated. We find strong evidence that the resulting large child support liabilities significantly reduced dissolution risks.

Partnership Dissolution, Complementarity, and Investment Incentives

We study a partnership that anticipates its possible dissolution. In our model, partnerships form in order to take advantage of complementary skills; although new opportunities may arise that make partners’ skills useless. We characterize the optimal, incentive-compatible partnership contract that can be implemented by a simple call option, and then analyze the commonly used buy–sell provision. We show that this dissolution rule gives rise to inefficiency, either in the form of excessive dissolutions combined with underinvestment or efficient dissolutions combined with overinvestment. However, supplementing the buy–sell provision with the right to veto may restore efficiency.

Applying accounting principles to a partnership dissolution

This teaching case shows how a partnership used a consultant to help resolve certain accounting issues associated with its dissolution. Focusing on accounting theory, partnership accounting and contracts, this case can help develop critical thinking skills and can be used in several accounting courses (including advanced financial accounting and accounting theory) at both the graduate and upper division undergraduate levels. The case demonstrates that lawyers and others who form partnerships should develop well-crafted operating agreements that cover normal and unusual business transactions as well as the firm’s dissolution. Specifically, they should identify and assess all matters relevant to the dissolution process, including the compensation scheme and other contractual issues. The case emphasizes the importance of accurate and timely accounting information – both during a firm’s life and at its dissolution. The case requires students to balance GAAP and the fair/equitable treatment of the partners involved.

How to Dissolve a Partnership

We survey in a uni…ed framework the recent literature on partnership dissolution in settings where agents have interdependent values. Contrary to the private values case where the main obstacle that hinders the construction of e¢cient trading mechanisms is the asymmetry in initial endowments, we …nd that informational asymmetries play here a major role. For settings where the …rst-best cannot be achieved, we study incentive-e¢cient mechanisms or other well-performing simple mechanisms whose rules do not depend on the exact speci…cation of the models’ parameters.

Partnership Dissolution in the UK – the Role of Economic Circumstances

Estimates based on couples with dependent children in the first eight years of the British Household Panel Study (1991‐98) indicate that changes in a couple's economic circumstances affect the probability that a partnership dissolves. In particular, unexpected improvements in finances substantially reduce the dissolution risk, which strongly supports the importance of new information in decisions concerning partnership dissolution. Measures of a couple's own expectations concerning their financial situation over the coming year have been used in conjunction with realised changes to gauge the impact of unexpected changes. The study also finds that the risk of partnership dissolution increases with the number of children.

More Realistic Models of Sexually Transmitted Disease Transmission Dynamics

Mathematical models of sexually transmitted disease transmission have proven powerful tools for interpreting observed epidemiologic pattern. However, the most commonly used formulation of such models largely fail to capture the effect of partnership concurrency and contact network structure on transmission. The development of a compartmental model of partnership formation and dissolution that includes approximations for the influence of the sexual-partner network. Theoretical analysis of ordinary differential equation models for sexually transmitted disease transmission within sex-partner networks. The approach developed advances earlier pair models, allows for the influence of concurrent sexual partnerships, and illustrates the importance of concurrency to the persistence of diseases with relatively short durations of infectiousness. The authors also illustrate that heterogeneity in risk is possible even in model populations in which all individuals follow the same behavioral rules. Deterministic extended pair models offer a powerful approach to modelling sexually transmitted disease transmission that usefully complement computationally intensive microsimulation models.

Parental divorce and partnership dissolution in adulthood: Evidence from a British cohort study

From a longitudinal survey of a British cohort born in 1958 this study finds that, by age 33, off-spring of parents who divorced are more likely to have dissolved their first partnerships. This finding persists after taking into account age at first partnership, type of first partnership (marital, pre-marital cohabiting union, and cohabiting union), and indicators of class background and childhood and adolescent school achievement and behaviour problems. Some of these factors are associated with partnership dissolution in their own right, but the association between parental divorce and second generation partnership dissolution is largely independent of them. Demographic factors, including type of and age at first partnership, were important links between parental divorce and partnership dissolution. Moreover, the estimated effects of parental divorce were substantially reduced when the demographic variables were taken into account, suggesting that cohabitation and early partnership may be important pathways through which a parental divorce, or the unmeasured characteristics correlated with it, affect partnership dissolution.

International Expansion Through Sequential Investment: The Effects of National Culture on Buyouts and Dissolutions in Biotechnology Partnerships

This study examines the role of national culture on an issue which is central to competitive strategy: whether to maintain flexibility or commit to a strategic direction. We consider that equity investments in foreign partners may be initiated as the first step in a sequential acquisition process. Applying a competing hazard model to a sample of 168 joint ventures and minority equity collaborations in the biotechnology industry, we find that cultural characteristics have some bearing on a firm's willingness to commit through partner acquisition or partnership dissolution, and its preference for flexibility embodied in maintaining an equity collaboration.

A Theory of Partnership Dynamics

This paper explores the benefits and drawbacks of potential partnership dissolution through an infinite-period, dynamic game-theoretic model of learning and endogenous dissolution. As partners learn about the quality of their partnership relative to their outside opportunities, the rents associated with the partnership change, effecting a related change in the strength of incentives to provide effort. Mild supermodularity conditions lead to effort levels in the optimal equilibria which rise in the expected quality of the partnership.Journal of Economic LiteratureClassification Numbers: C72, C73, L14.