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Household Relational Contracts for Marriage, Fertility and Divorce

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  • Matthias Fahn
  • Ray Rees
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    Abstract

    This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed among partners, there is a potential conflict between individually optimal and efficient, i.e. surplus maximizing, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the effects of policy variables such as rights of access to children post-separation and wealth division/alimony rules, as well as the legal costs of divorce, on the interrelationships among the decisions on marriage, fertility and divorce.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-11/cesifo1_wp3655.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3655.

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    Date of creation: 2011
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    Handle: RePEc:ces:ceswps:_3655

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    1. Kai A. Konrad & Kjell Erik Lommerud, 2000. "The bargaining family revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 471-487, May.
    2. Apps,Patricia & Rees,Ray, 2009. "Public Economics and the Household," Cambridge Books, Cambridge University Press, number 9780521716284, April.
    3. Lommerud, K.E., 1988. "Marital Division Of Labor With Risk Of Divorce: The Role Of Enforcement Of Contracts," Papers 09-88, Norwegian School of Economics and Business Administration-.
    4. Guven, Cahit & Senik, Claudia & Stichnoth, Holger, 2010. "You can't be happier than your wife: happiness gaps and divorce," ZEW Discussion Papers 10-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Jonathan Levin, 2000. "Relational Incentive Contracts," Working Papers 01002, Stanford University, Department of Economics.
    6. Matthias Doepke, 2005. "Child mortality and fertility decline: Does the Barro-Becker model fit the facts?," Journal of Population Economics, Springer, vol. 18(2), pages 337-366, 06.
    7. Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Economics Letters, Elsevier, vol. 48(2), pages 193-199, May.
    8. Rasul, Imran, 2008. "Household bargaining over fertility: Theory and evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 86(2), pages 215-241, June.
    9. Betsey Stevenson & Justin Wolfers, 2007. "Marriage and Divorce: Changes and their Driving Forces," NBER Working Papers 12944, National Bureau of Economic Research, Inc.
    10. Bellido, Héctor & Marcén, Miriam, 2011. "Divorce laws and fertility decisions," MPRA Paper 30243, University Library of Munich, Germany.
    11. Betsey Stevenson, 2006. "The impact of divorce laws on marriage-specific capital," Working Paper Series 2006-43, Federal Reserve Bank of San Francisco.
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    Cited by:
    1. Patricia Apps & Yuri Andrienko & Ray Rees, 2012. "Risk and Saving in Two-Person Households: More Scope for Precautionary Saving," CEPR Discussion Papers 674, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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