Efficiency of Family Bargaining Models with Renegotiation: The Role of Transferable Utility across Periods
Elisabeth Gugl and
Linda Welling ()
Studies in Microeconomics, 2017, vol. 5, issue 1, 53-83
In dynamic family bargaining models, it is often assumed, for simplicity, that spouses have transferable utility as well as identical and constant marginal rates of intertemporal substitution. It has been argued that as long as spouses are at an interior solution, renegotiation does not hinder efficiency. We show that identical and constant marginal rates of intertemporal substitution (i.e., transferable utility across periods) are the source of this efficiency result. Even at an interior solution, renegotiation can cause inefficiency if marginal rates of intertemporal substitution are not constant. Our model is the first to both identify this source of inefficiency in a bargaining model in which the threatpoints of later periods are determined endogenously and demonstrate that there is no one-size-fits-all policy regulating divorce that can restore efficiency when couples are allowed to differ in their initial wage rates and/or preferences.
Keywords: Family bargaining with renegotiation; Household production; specialization; gender wage gap; intertemporal preferences (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sae:miceco:v:5:y:2017:i:1:p:53-83
Access Statistics for this article
More articles in Studies in Microeconomics
Bibliographic data for series maintained by SAGE Publications ().