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Marriage as a Rat Race: Noisy Pre-Marital Investments with Assortative Matching

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  • Bhaskar, Venkataraman
  • Hopkins, Ed

Abstract

We study the incentives of parents to invest in their children when these investments improve their marriage prospects, in a frictionless marriage market with non-transferable utility. Stochastic returns to investment eliminate the multiplicity of equilibria that plagues models with deterministic returns, and ensure that a unique equilibrium often exists. Equilibrium investment is efficient when there is complete symmetry between the sexes. However, when there is any asymmetry between the sexes, including an unbalanced sex ratio, investments are generically excessively relative to Pareto-efficiency. Our model can be used for examine several implications of gender differences. For example, if shocks are more variable for boys than for girls, girls will invest more than boys. If there is an excess of boys, then there is parental over-investment in boys and under-investment in girls, and total investment will be excessive.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8529.

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Date of creation: Aug 2011
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Handle: RePEc:cpr:ceprdp:8529

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Keywords: assortative matching tournament; ex ante investments; gender differences; marriage; sex ratio.;

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References

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  1. Peters, Michael, 2004. "The Pre-Marital Investment Game," Microeconomics.ca working papers peters-04-02-18-01-42-09, Vancouver School of Economics, revised 13 Sep 2006.
  2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  3. Ed Hopkins, 2012. "Job Market Signaling Of Relative Position, Or Becker Married To Spence," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 290-322, 04.
  4. Thomas Gall & Patrick Legros & Andrew F. Newman, 2009. "Mis-match, Re-match, and Investment," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-189, Boston University - Department of Economics.
  5. V. Bhaskar, 2011. "Sex Selection and Gender Balance," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 214-44, February.
  6. Peters, Michael, 2006. "Truncated Hedonic Equilibrium," Microeconomics.ca working papers peters-06-04-11-02-42-39, Vancouver School of Economics, revised 03 Mar 2009.
  7. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  8. Iyigun, Murat & Walsh, Randall P., 2005. "Building the Family Nest: Pre-Marital Investments, Marriage Markets and Spousal Allocations," IZA Discussion Papers 1752, Institute for the Study of Labor (IZA).
  9. Pierre-Andre Chiappori & Yoram Weiss & Murat Iyigun & Yoram Weiss, 2006. "Investment in Schooling and the Marriage Market," 2006 Meeting Papers 43, Society for Economic Dynamics.
  10. Ed Hopkins & Tatiana Kornienko, 2010. "Which Inequality? The Inequality of Endowments versus the Inequality of Rewards," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 106-37, August.
  11. Michael Peters & Aloysius Siow, 2000. "Competing Pre-marital Investments," Working Papers peters-00-01, University of Toronto, Department of Economics.
  12. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  13. Roger B. Myerson, 1998. "Population uncertainty and Poisson games," International Journal of Game Theory, Springer, vol. 27(3), pages 375-392.
  14. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
  15. V. Bhaskar, 2011. "Corrigendum: Sex Selection and Gender Balance," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 252-53, May.
  16. repec:bla:restud:v:76:y:2009:i:1:p:253-281 is not listed on IDEAS
  17. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2006. "The Theory of Assortative Matching Based on Costly Signals," CEPR Discussion Papers 5543, C.E.P.R. Discussion Papers.
  18. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  19. Burdett, Ken & Coles, Melvyn G, 2001. "Transplants and Implants: The Economics of Self-Improvement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 597-616, August.
  20. Murat Nick & P. Randall Walsh, 2007. "Building the Family Nest: Premarital Investments, Marriage Markets, and Spousal Allocations," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 507-535.
  21. Shang-Jin Wei & Xiaobo Zhang, 2011. "Sex Ratios, Entrepreneurship, and Economic Growth in the People’s Republic of China," NBER Working Papers 16800, National Bureau of Economic Research, Inc.
  22. George J. Mailath & Andrew Postlewaite & Larry Samuelson, 2010. ""Pricing and Investments in Matching Markets",Second Version," PIER Working Paper Archive 10-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 Nov 2010.
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Cited by:
  1. Qingyuan Du & Shang-Jin Wei, 2013. "A Theory of the Competitive Saving Motive," Working Papers 252013, Hong Kong Institute for Monetary Research.
  2. Georg Noldeke & Larry Samuelson, 2014. "Investment and Competitive Matching," Cowles Foundation Discussion Papers 1946, Cowles Foundation for Research in Economics, Yale University.

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