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Journal of Law, Economics, and Organization Advance Access originally published online on September 15, 2006
Journal of Law, Economics, and Organization 2007 23(3):580-597; doi:10.1093/jleo/ewm013
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© The Author 2006. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

The Effect on Divorce of Legislated Net-Wealth Transfers

Douglas W. Allen*

Simon Fraser University

* Burnaby Mountain Professor of Economics, Department of Economics, Simon Fraser University. Email: allen{at}sfu.ca.

In recent years, legislatures have imposed several types of guidelines restricting court discretion. Guidelines designed around "average" cases, however, can lead to problems for "nonaverage" situations. In the context of divorce, poorly designed child support guidelines may create an opportunity for a net-wealth transfer in excess of the costs of children for "nonaverage" families and therefore create an incentive to divorce. This incentive to divorce, when coupled with the ability to divorce under no-fault laws, may lead to higher divorce rates for certain classes of couples. This article exploits the 1997 Canada Child Support Guidelines to test the divorce prediction using data from the Survey of Labour Income Dynamics. I find separation rates increase after implementation of the Guidelines among couples with income of $25,000 per year.


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