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For Better or For Worse? State-Level Marital Formation and Risk Sharing

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  • Ralph Chami
  • Gregory Hess

    ()

Abstract

Why do some U.S. states have higher levels of marital formation than others? This paper introduces an economic model wherein a state’s representative individual may choose to marry in order to diversify his or her idiosyncratic income risk. The paper demonstrates that such a diversification motive is enhanced for some utility functions when a state’s level of undiversifiable risk becomes larger, and when a state’s initial income is lower. A test of the model’s predictions, using cross-sectional data for the 50 U.S. states, provides some suggestive evidence for a risk sharing motive in marriage formation and joint spouse labor participation. Copyright Springer Science+Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11150-005-4940-2
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Bibliographic Info

Article provided by Springer in its journal Review of Economics of the Household.

Volume (Year): 3 (2005)
Issue (Month): 4 (December)
Pages: 367-385

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Handle: RePEc:kap:reveho:v:3:y:2005:i:4:p:367-385

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Web page: http://www.springerlink.com/link.asp?id=109451

Related research

Keywords: consumption insurance; marriage; J12; D1; E21;

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References

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  1. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
  2. Ogaki, Masao & Zhang, Qiang, 2001. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Econometrica, Econometric Society, vol. 69(2), pages 515-26, March.
  3. Hess, Gregory D. & Shin, Kwanho, 1998. "Intranational business cycles in the United States," Journal of International Economics, Elsevier, vol. 44(2), pages 289-313, April.
  4. Marco Del Negro, 1999. "Asymmetric shocks among U.S. states," Working Papers 9903, Centro de Investigacion Economica, ITAM.
  5. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
  6. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
  7. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October.
  8. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June.
  9. Joseph Lupton & James P. Smith, 1999. "Marriage, Assets, and Savings," Working Papers 99-12, RAND Corporation Publications Department.
  10. Jonathan Gruber, 2000. "Is Making Divorce Easier Bad for Children? The Long Run Implications of Unilateral Divorce," NBER Working Papers 7968, National Bureau of Economic Research, Inc.
  11. Ralph Chami & Gregory D. Hess, 2002. "For Better or For Worse? State-Level Marital Formation and Risk Sharing," CESifo Working Paper Series 702, CESifo Group Munich.
  12. Gregory D. Hess & Kwanho Shin, 1999. "Risk sharing of disaggregate macroeconomic and idiosyncratic shocks," Working Paper 9915, Federal Reserve Bank of Cleveland.
  13. Susan Dynarski & Jonathan Gruber, 1997. "Can Families Smooth Variable Earnings?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 229-303.
  14. Gregory D. Hess & Kwanho Shin, 1997. "Risk sharing by households within and across regions and industries," Research Working Paper 97-07, Federal Reserve Bank of Kansas City.
  15. Gregory D. Hess, 2001. "Marriage and Consumption Insurance: What’s Love Got to do With It?," CESifo Working Paper Series 507, CESifo Group Munich.
  16. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  17. Mario J Crucini & Gregory D Hess, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series 227, CESifo Group Munich.
  18. Todd E. Clark & Kwanho Shin, 1998. "The sources of fluctuations within and across countries," Research Working Paper 98-04, Federal Reserve Bank of Kansas City.
  19. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Martin Halla & Johann Scharler, 2008. "Marriage, Divorce and Interstate Risk Sharing," NRN working papers 2008-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  2. Ralph Chami & Gregory D. Hess, 2002. "For Better or For Worse? State Level Marital Formation and Risk Sharing," Claremont Colleges Working Papers 2002-07, Claremont Colleges.
  3. Filippo Pericoli & Luigi Ventura, 2012. "Family dissolution and precautionary savings: an empirical analysis," Review of Economics of the Household, Springer, vol. 10(4), pages 573-595, December.
  4. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations: Evidence from the Belgian Firm's Data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-92281, Tilburg University.
  5. Nzinga Broussard & Ralph Chami & Gregory Hess, 2003. "(Why) Do Self-Employed Parents Have More Children?," CESifo Working Paper Series 1103, CESifo Group Munich.
  6. Christopher Brown & Randall Kesselring, 2006. "Declining marriage ratios of young black women: Testing alternative economic hypotheses," The Review of Black Political Economy, Springer, vol. 33(4), pages 27-48, March.
  7. Wataru Kureishi & Midori Wakabayashi, 2013. "What motivates single women to save? the case of Japan," Review of Economics of the Household, Springer, vol. 11(4), pages 681-704, December.

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