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Marital Risk, Family Insurance, and Public Policy

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  • Hans Fehr
  • Manuel Kallweit
  • Fabian Kindermann

Abstract

The present paper aims to quantify the growth and welfare consequences of changing family structures in western societies. For this reason we develop a dynamic general equilibrium model with both genders which takes into account changes of the marital status as a stochastic process. Individuals respond to these shocks by adjusting savings and labor supply. Our quantitative results indicate that the declining number of marriages coupled with increasing divorce rates had a profound effect on macroeconomic variables and long-run welfare. We find a significant increase in aggregate capital accumulation and a rising labor market participation of women. In addition, our simulations indicate that the change in the marital structure had significant negative welfare consequences for women who lost between 0.4 and 2.2 percent of aggregate resources. The impact on men's welfare, however, could be positive or negative depending on the specific calibration.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 226.

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Length: 24 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp226

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Keywords: family formation; stochastic general equilibrium; life cycle model;

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References

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  1. Hector Chade & Gustavo Ventura, . "Taxes and Marriage: A Two-Sided Search Analysis," Working Papers, Department of Economics, W. P. Carey School of Business, Arizona State University 2132862, Department of Economics, W. P. Carey School of Business, Arizona State University.
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Cited by:
  1. Hans Fehr & Daniela Ujhelyiova, 2013. "Fertility, Female Labor Supply, and Family Policy," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 14(2), pages 138-165, 05.

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