Love and Taxes - and Matching Institutions

Kjell Lommerud () and Kai Konrad

No 6703, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has a high income and is a perfect emotional match, but compromises must often be struck. A high-income earner may abstain from marrying a low-income earner even though they would be a perfect match emotionally, because he may dislike the implicit income redistribution implied by marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people from the same income groups largely meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage.

Keywords: Assortative mating; Divorce; Emotional rents; Incomplete contracts; Love; Marriage; Optimal taxation (search for similar items in EconPapers)
JEL-codes: D61 H21 J12 (search for similar items in EconPapers)
Date: 2008-02
New Economics Papers: this item is included in nep-pub
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Love and taxes - and matching institutions (2010)
Working Paper: Love and taxes - and matching institutions (2010)
Working Paper: Love and taxes - and matching institutions (2008)
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