Table of Contents

Vanity Economics

Vanity Economics

An Economic Exploration of Sex, Marriage and Family

C. Simon Fan

This book presents an accessible and sometimes controversial economic exploration of numerous issues surrounding sex, marriage and family. It analyzes the role of ‘vanity’, defined as social status and self-esteem, in social and economic behaviors.

Chapter 20: Vanity and divorce

C. Simon Fan

Subjects: economics and finance, behavioural and experimental economics, institutional economics

Extract

Divorce, the legal ending of a marriage, is a common occurrence. In the USA, the divorce rate rose steadily from 2.5 per 1000 people in 1966 to a peak of 5.3 in both 1979 and 1981 before dropping back to 3.4 inDivorce, the legal ending of a marriage, is a common occurrence. In the USA, the divorce rate rose steadily from 2.5 per 1000 people in 1966 to a peak of 5.3 in both 1979 and 1981 before dropping back to 3.4 in 2009. Note that a large fraction of the population is unmarried (e.g. young children) and that old people usually do not divorce. Thus the refined divorce rate for young and middle-aged married couples, which is defined as the number of divorced couples over the total number of married couples for these age groups, should be much higher than the preceding numbers. Further, these figures indicate that a marriage is at risk of divorce for a given year only. Over many years, even a low annual divorce rate results in a large proportion of couples ending their marriages in divorce. For example, Lillard and Waite (1990) estimated that, if the divorce rates of the 1980s continued into the future, more than half of first marriages in the USA would end in divorce, and remarriage with new partners would be more prone to dissolution. Why do so many people choose to divorce? Divorce is a major decision for most people. Thus it is reasonable to assume that people are rational and forward looking in making the decision to divorce. Based on this assumption, an individual chooses divorce only if their utility (i.e. happiness index) from a current marriage is less than their expected utility of future alternatives such as remarriage.

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