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

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  • Ralph Chami
  • Gregory D. Hess

Abstract

Why do some U.S. states have higher levels of marital formation than others? This paper introduces an economic model wherin 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 and growth rate is lower. A test of the model’s predictions, using cross-sectional data for the 50 U.S. states, suggests that there is broad support for a risk sharing motive for marriage as well as for a precautionary savings motive.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-04/702.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 702.

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Date of creation: 2002
Date of revision:
Handle: RePEc:ces:ceswps:_702

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Keywords: consumption insurance; marriage;

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References

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  1. Masao Ogaki & Qiang Zhang, 1998. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Working Papers 98-02, Ohio State University, Department of Economics.
  2. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  3. Joseph Lupton & James P. Smith, 1999. "Marriage, Assets, and Savings," Working Papers 99-12, RAND Corporation Publications Department.
  4. 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.
  5. Miles S. Kimball, 1991. "Standard Risk Aversion," NBER Technical Working Papers 0099, National Bureau of Economic Research, Inc.
  6. Ralph Chami & Gregory Hess, 2005. "For Better or For Worse? State-Level Marital Formation and Risk Sharing," Review of Economics of the Household, Springer, vol. 3(4), pages 367-385, December.
  7. Del Negro, Marco, 2002. "Asymmetric shocks among U.S. states," Journal of International Economics, Elsevier, vol. 56(2), pages 273-297, March.
  8. Hess, G.D. & Shin, K., 1999. "Risk Sharing of Disaggregate Macroeconomic and Idiosyncratic Shocks," Papers 9915, London School of Economics - Centre for Labour Economics.
  9. Hess, Gregory D. & Shin, Kwanho, 2000. "Risk sharing by households within and across regions and industries," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 533-560, June.
  10. Mario J Crucini & Gregory D Hess, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series 227, CESifo Group Munich.
  11. 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.
  12. 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.
  13. Gregory D. Hess, 2004. "Marriage and Consumption Insurance: What's Love Got to Do with It?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 290-318, April.
  14. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June.
  15. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
  16. 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.
  17. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
  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. 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.
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Citations

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Cited by:
  1. 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.
  2. Nzinga Broussard & Ralph Chami & Gregory Hess, 2003. "(Why) Do Self-Employed Parents Have More Children?," CESifo Working Paper Series 1103, CESifo Group Munich.
  3. Martin Halla & Johann Scharler, 2008. "Marriage, Divorce and Interstate Risk Sharing," Economics working papers 2008-16, Department of Economics, Johannes Kepler University Linz, Austria.
  4. 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.
  5. 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.
  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. 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.

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