Building the Family Nest: A Collective Household Model with Competing Pre-Marital Investments and Spousal Matching

University of Colorado at Boulder Paper No. 04-01

33 Pages Posted: 19 Aug 2004

See all articles by Murat Iyigun

Murat Iyigun

University of Colorado at Boulder - Department of Economics; Harvard University - Center for International Development (CID); IZA Institute of Labor Economics

Randall P. Walsh

University of Colorado at Boulder - Department of Economics

Date Written: January 2004

Abstract

We develop a model of the household in which spousal incomes are determined by pre-marital investments, the marriage market is characterized by assortative spousal matching, and endogenously-determined sharing rules form the basis of intra-household allocations. By incorporating pre-marital investments and spousal matching into the collective household model, we are able to (a) establish the welfare implications of the collective household model for pre-marital choices and spousal matching and (b) identify the fundamental determinants of endogenously-determined and maritally sustainable intra-marital sharing rules. In particular, we find that all sharing rules along the assortative order support unconditionally efficient outcomes where both pre-marital investment and intra-household allocations are efficient. We also show that, for each couple, the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of the pre-marital endowments and the sex ratios in the marriage market.

Keywords: marriage, bargaining, household labor supply

JEL Classification: C78, D61, D70

Suggested Citation

Iyigun, Murat F. and Walsh, Randall P., Building the Family Nest: A Collective Household Model with Competing Pre-Marital Investments and Spousal Matching (January 2004). University of Colorado at Boulder Paper No. 04-01, Available at SSRN: https://ssrn.com/abstract=577741 or http://dx.doi.org/10.2139/ssrn.577741

Murat F. Iyigun (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-6653 (Phone)
303-492-8622 (Fax)

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Randall P. Walsh

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-4599 (Phone)
303-492-8622 (Fax)

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