Child support guidelines and divorce incentives

A child support guideline is a formula used to calculate support payments based on a few family characteristics. Guidelines began replacing court awarded support payments in the late 1970s and early 1980s, and were eventually mandated by the federal government in 1988. Two fundamentally different types of guidelines are used: percentage of obligor income, and income shares models. This paper explores the incentives to divorce under the two schemes, and uses the NLSY data set to test the key predictions. We find that percentage of obligor income models are destabilizing for some families with high incomes. This may explain why several states have converted from obligor to income share models, and it provides a subtle lesson for the no-fault divorce debate.

► At one time the US had court awarded child support. By 1988 all states were mandated to have a child support guideline formula. Almost all states have one of two types: percentage of obligor income (PO), or income shares (IS). ► We argue that the PO system has built in features that create divorce incentives when one spouse earns a high income. ► Using the NLSY, we test this hypothesis a number of ways and find evidence that confirms it. This helps explain why states have been migrating to the IS system.