Building the Family Nest: Pre-Marital Investments, Marriage Markets and Spousal Allocations

Murat F. Iyigun () and Randall Phillip Walsh ()

No 1752, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We develop a model of the household in which spousal incomes are determined by pre-marital investments, the marriage market is characterized by assortative matching, and endogenously-determined sharing rules form the basis of intra-household allocations. By incorporating pre-marital investments and spousal matching into the collective household model, we are able to identify the fundamental determinants of endogenously determined and maritally sustainable intra-marital sharing rules. In particular, we find that all sharing rules along the assortative order support unconditionally efficient outcomes where both pre-marital investments and intra-household allocations are efficient. The efficiency of both pre-marital choices and household allocations then enables us to show that, for each couple, the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of pre-marital endowments and the sex ratios in the market.

Keywords: household labor supply; bargaining; marriage; collective model (search for similar items in EconPapers)
JEL-codes: C78 D61 D70 (search for similar items in EconPapers)
Date: 2005-09
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Published in: Review of Economic Studies, 2007, 74 (2), 507-532

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