Collateralized Marriage

59 Pages Posted: 26 May 2020

See all articles by Jeanne Lafortune

Jeanne Lafortune

Pontifical Catholic University of Chile - Institute of Economics; IZA

Corinne Low

University of Pennsylvania

Date Written: May 2020

Abstract

We develop 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 goods’ creation will be sub-optimal. However, investing in 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. Empirically, we show that quasi-exogenous variation in access to collateralization leads to more specialization, and that wealth has become a more important determinant of marriage in response to policies that have made marriage and cohabitation more similar. Wealthy individuals can thus access a more advantageous marriage contract, which has important policy implications.

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Suggested Citation

Lafortune, Jeanne and Low, Corinne, Collateralized Marriage (May 2020). NBER Working Paper No. w27210, Available at SSRN: https://ssrn.com/abstract=3609663

Jeanne Lafortune (Contact Author)

Pontifical Catholic University of Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

IZA ( email )

Corinne Low

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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