Can looser ties sustain marriage? A dynamic matching model of specialisation and divorce
Durable marriages are presumed to foster the household specialisation that marriage enables. We exploit a recent Dutch reform that temporarily lowered the cost of divorce while leaving consent requirements unchanged. We embed divorce hazards obtained from population-level administrative data into a dynamic structural matching model in which individuals repeatedly match and choose marital roles. We identify the structural parameters by fitting the model to the equilibrium matching distribution over time, using a novel computational approach. Compared to the high-cost counterfactual, we find that more couples choose marriage when divorce costs are lower, as higher rates of marriage entry outweigh the rise in divorce. Because specialisation is preserved, aggregate welfare rises.