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

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Author Info
Ralph Chami (International Monetary Fund)
Gregory D. Hess (Claremont McKenna College and CESifo)

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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 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 a precautionary attitude towards risk.

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Publisher Info
Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2002-07.

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Date of creation: Jul 2002
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Handle: RePEc:clm:clmeco:2002-07

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Related research
Keywords: Consumption Insurance; Marriage;

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Find related papers by JEL classification:
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
D1 - Microeconomics - - Household Behavior
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Gregory D. Hess, 2001. "Marriage and consumption insurance: what's love got to do with it?," Working Paper 0104, Federal Reserve Bank of Cleveland. [Downloadable!]
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  3. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May. [Downloadable!] (restricted)
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  4. Gregory D. Hess & Kwanho Shin, 1999. "Risk sharing of disaggregate macroeconomic and idiosyncratic shocks," Working Paper 9915, Federal Reserve Bank of Cleveland.
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  5. Del Negro, Marco, 2002. "Asymmetric shocks among U.S. states," Journal of International Economics, Elsevier, vol. 56(2), pages 273-297, March. [Downloadable!] (restricted)
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  6. Crucini, Mario J & Hess, Gregory D, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  7. 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. [Downloadable!] (restricted)
  8. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January. [Downloadable!] (restricted)
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  9. 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. [Downloadable!]
  10. Lupton, J. & Smith, J.P., 1999. "Marriage, Assets, and Savings," Papers 99-12, RAND - Labor and Population Program.
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  11. 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. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Ogaki, Masao & Zhang, Qiang, 2001. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Econometrica, Econometric Society, vol. 69(2), pages 515-26, March.
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  15. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Halla, Martin & Scharler, Johann, 2008. "Marriage, Divorce and Interstate Risk Sharing," IZA Discussion Papers 3744, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Nzinga Broussard & Ralph Chami & Gregory Hess, 2003. "(Why) Do Self-Employed Parents Have More Children?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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