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A Dynamic Model of Marital Settlements and Alimony Renegotiations

Abstract
When a married couple without children divorces, the division of marital property and the allocation of future earnings are decided through negotiations. If the couple cannot agree, the court determines the marital settlement based upon the state laws and various factors such as the length of the marriage, the spouses' ages, the education levels of the spouses, their asset holdings, incomes, etc. Unlike the division of the marital property which is implemented once and for all, the allocation of future earnings is subject to further renegotiation due to changing circumstances like the loss of a job or an increase in the cost of the living. As a result, the spouses need to take into account the potential future renegotiation at any time they (re)negotiate the alimony payments. The goal of this project is to build and estimate a dynamic model of divorce renegotiations to address the following questions: How do characteristics of the spouses affect the duration and the amount of alimony payments? What factors determine the renegotiation decisions? What role does the court involvement (such as contempt, wage orders, arrest orders) help in enforcing the payments? What are the effects of imposing time limits in the duration of the alimony payments (as in recent reforms in some states and being debated in others)? With a little more work, this project will be put in an NSF grant proposal. The extra work will involve obtaining data from Wisconsin Circuit Court and adjusting the model in light of the additional information available in the court documents.