Love and taxes - and matching institutions

Kai Konrad and Kjell Lommerud ()

No 03/08, Working Papers in Economics from University of Bergen, Department of Economics

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 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 per- fect match emotionally, because the high-income earner may dislike the implicit income redistribution implied by the marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people largely from the same income groups 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: marriage; optimal taxation; emotional rents; love; incomplete contracts; assortative mating; divorce (search for similar items in EconPapers)
JEL-codes: D61 H21 J12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-02-05
References: View references in EconPapers View complete reference list from CitEc
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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Persistent link: https://EconPapers.repec.org/RePEc:hhs:bergec:2008_003

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