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

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  • Ralph Chami

    (International Monetary Fund)

  • Gregory D. Hess

    (Claremont McKenna College and CESifo)

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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File URL: http://www.claremontmckenna.edu/rdschool/papers/2002-07.pdf
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Bibliographic 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
Date of revision:
Handle: RePEc:clm:clmeco:2002-07

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Keywords: Consumption Insurance; Marriage;

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References

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  1. Gregory D. Hess, 2001. "Marriage and consumption insurance: what's love got to do with it?," Working Paper 0104, Federal Reserve Bank of Cleveland.
  2. Marco Del Negro, 1999. "Asymmetric shocks among U.S. states," Working Papers 9903, Centro de Investigacion Economica, ITAM.
  3. 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.
  4. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
  5. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June.
  6. 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.
  7. Gregory D. Hess & Kwanho Shin, 1999. "Risk sharing of disaggregate macroeconomic and idiosyncratic shocks," Working Paper 9915, Federal Reserve Bank of Cleveland.
  8. Lupton, J. & Smith, J.P., 1999. "Marriage, Assets, and Savings," Papers 99-12, RAND - Labor and Population Program.
  9. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
  10. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
  11. Mario J Crucini & Gregory D Hess, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series 227, CESifo Group Munich.
  12. Masao Ogaki & Qiang Zhang, 2000. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Econometric Society World Congress 2000 Contributed Papers 1588, Econometric Society.
  13. 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.
  14. 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.
  15. 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.
  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. 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.
  18. 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.
  19. 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.
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Citations

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Cited by:
  1. Martin Halla & Johann Scharler, 2012. "Marriage, Divorce, and Interstate Risk Sharing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 55-78, 03.
  2. 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.
  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. 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.
  6. 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.
  7. Nzinga Broussard & Ralph Chami & Gregory Hess, 2003. "(Why) Do Self-Employed Parents Have More Children?," CESifo Working Paper Series 1103, CESifo Group Munich.

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