Edited by Kenneth Ayotte and Henry E. Smith
Chapter 11: The Law and Economics of Marital Property
Martin Zelder 1. INTRODUCTION For the purposes of economic analysis, marital property can be construed in two different but complementary (and sometimes overlapping) ways: (1) the formal legal sense, and (2) the functional practical sense. Marital property, as defined formally/legally, refers to property acquired during marriage and thereby (typically) subject to division upon divorce. Marital property can also be defined in a functional/practical sense as assets which provide consumption flows that can be used to make transactions within both marriage and divorce. It is worth brief consideration and comparison of these two senses of marital property, and how they have been affected by developments in law and in economics. In regard to formal/legal marital property, the law is clearly instrumental in determining its scope and the extent to which it is transferred between spouses. To be specific, at the time of divorce, property is classified either as marital (and necessarily subject to division) or separate (and not necessarily subject to division). Furthermore, the legal system then sets standards or guidelines as to the appropriate magnitude of post-divorce transfers. As for functional/practical marital property, it can be construed as assets which yield consumption flows which can be used for transacting within marriage and divorce. In recent years, economic analysis of spousal transacting has identified a fundamental issue, transferability, which critically influences the effect of legal rules governing marriage and divorce (and changes in them). The implications of limitations on transferability, and of changes in legal rules, will be explored in the...
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