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Love and Taxes - and Matching Institutions

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  • Konrad, Kai A
  • Lommerud, Kjell Erik

Abstract

We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has a high income and is a perfect emotional match, but compromises must often be struck. A high-income earner may abstain from marrying a low-income earner even though they would be a perfect match emotionally, because he may dislike the implicit income redistribution implied by marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people from the same income groups largely meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6703.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6703

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Keywords: assortative mating; divorce; emotional rents; incomplete contracts; love; marriage; optimal taxation;

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References

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Citations

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Cited by:
  1. Alessandro Balestrino & Cinzia Ciardi & Claudio Mammini, 2008. "On the Causes and Consequences of Divorce," CESifo Working Paper Series 2347, CESifo Group Munich.
  2. Dan Anderberg & Yu Zhu, 2014. "What a difference a term makes: the effect of educational attainment on marital outcomes in the UK," Journal of Population Economics, Springer, vol. 27(2), pages 387-419, April.
  3. Konrad, Kai A., 2013. "Affection, speed dating and heart breaking," Discussion Papers, Research Unit: Economics of Change SP II 2013-309, Social Science Research Center Berlin (WZB).
  4. Dan Anderberg & Yu Zhu, 2010. "The Effect of Education on Marital Status and Partner Characteristics: Evidence from the UK," CESifo Working Paper Series 3104, CESifo Group Munich.
  5. Aloys Prinz, 2010. "Labor markets and mating markets: Using taxes to reduce the male–female pay gap," Journal of Bioeconomics, Springer, vol. 12(1), pages 43-53, April.

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