Property division on divorce with inequity aversion

In the absence of transaction costs, the divorce decision is invariant to legal rules on post-divorce asset allocation. This article introduces a one-sided inequity aversion model to show that property division laws can have efficiency as well as distributive consequences. When divorce is a credible threat, aversion to inequity may prevent spouses renegotiating their marriage to avoid an inefficient marital dissolution. Contemporary trends towards greater equality in property division can be interpreted in terms of their beneficial efficiency effects in addition to standard distributive concerns. (C) 2007 Elsevier Inc. All rights reserved.