Child Support Enforcement and Childrens Consumption

This paper examines the consequences of child support enforcement on children’s consumption. I model the interaction in separated couples as a repeated game between the noncustodial father and the custodial mother who exclusively controls the child’s consumption. The father can only in‡uence the child’s consumption through transfers to the mother. Initially, parents agree on transfer payments and child expenditure, but can renege on their part of the contract at any time.Using the non-cooperative Nash-Stackelberg equilibrium as a threat point, I characterize the Pareto frontier of Subgame Perfect Equilibrium payo¤s. I then incorporate the legal background by allowing for strict child support guidelines and enforcement. Relative to the old, no-enforcement threat point, the enforcement option delivers a higher utility to the mother, making it harder to satisfy her incentive for spending large amounts on the child. As a result, mothers will spend a larger fraction of their income on themselves and a lower fraction on the child. Using CEX data from years before and after the enforcement policies were implemented, I isolate childand mother-speci…c expenditure for unmarried mothers with and without child support and regress the ratio of mother to child expenditures over period dummies and mother and child characteristics. The results indicate a signi…cant increase in this ratio for mothers receiving child support, supporting the model prediction. On the other hand, there is no observable change in that ratio for mothers not receiving child support suggesting that their behavior was, as expected, una¤ected by the new laws.