PhD Seminar: Legal Shock, Intra-Household Bargaining, and Fertility: Evidence from China’s 2011 Marriage Law Reform

Legal Shock, Intra-Household Bargaining, and Fertility: Evidence from China’s 2011 Marriage Law Reform

Abstract: This paper examines how changes in divorce property division rules affect intra-household bargaining power. Exploiting the 2011 Judicial Interpretation (III) of China’s Marriage Law, which shifted marital property from a community regime to a title-based regime, we identify a negative wealth shock to women in households where homes were purchased pre-marriage and titled solely to husbands. We document a critical theoretical puzzle: while existing literature interprets the reform as an increase in divorce costs that should stabilize marriage, empirical evidence consistently shows a decline in fertility, contradicting Becker (1981)’s prediction that stability encourages marriage-specific investments. We resolve this paradox by proposing a mechanism driven by changes in the relative returns to capital: the reform raises the value of portable market capital as a form of insurance, shifting incentives away from marriage-specific investments. Using a structural exposure difference-in-differences design, we estimate a differential post-2011 decline in new births of 5.1 percentage points under the main exposure definition and 3.6 percentage points under the stricter definition, relative to homeowner controls. These findings distinguish the effects of property rights from divorce barriers, highlighting the unintended gendered consequences of ostensibly neutral legal reforms.