Collateralized Marriage

Jeanne Lafortune and Corinne Low

No 27210, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the role of wealth in the marriage contract by developing a model of the household where investments in public goods can be made at the cost of future earnings. If couples cannot commit ex ante to a sufficiently equal post-divorce allocation, specialization and public good creation will be sub-optimal. However, accumulating joint assets, which the marriage contract specifies are to be divided in the case of divorce, can reduce this problem by offering insurance to the lower earning partner. Our model demonstrates that access to this “collateralized” version of the contract will lead to more household specialization, more public goods, and a higher value of marriage. To test the model’s predictions, we use homeownership as a proxy for access to joint savings technology, since homes are particularly likely to be divided in a way that favors the lower earning partner. We use idiosyncratic variation in housing prices at the time of marriage and an instrumental variables strategy to show that quasi-exogenous variation in homeownership access leads to greater specialization. We then show that as policies made marriage and non-marital fertility more similar in other ways, wealth has become a more important determinant of who marries. Our model and empirical results suggest wealthy individuals can access a more advantageous marriage contract, which has important policy implications.

JEL-codes: D13 D14 D31 J12 J22 J24 (search for similar items in EconPapers)
Date: 2020-05
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Jeanne Lafortune & Corinne Low, 2023. "Collateralized Marriage," American Economic Journal: Applied Economics, vol 15(4), pages 252-291.

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Journal Article: Collateralized Marriage (2023)
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