The effect of divorce costs on marriage formation and dissolution

Exploiting the theoretical parallels between the matching of workers to job s in the labour market and the matching of individuals in the marriage mark et, we use a search theoretic model of marriage formation and dissolution t o examine the effect of divorce costs on both decisions. By introducing lea rning at both stages of the marital decision process, we show that divorce costs not only affect the probability of divorce but also the probability o f marriage. Interestingly, to what extent divorce costs affect the marital status distribution depends on the information regarding the quality of the potential marriage that individuals receive while encountering marital off ers. JEL classification: J12.