Building the Family Nest: Pre-Marital Investments, Marriage Markets and Spousal Allocations
AbstractWe develop a model of the household in which spousal incomes are determined by pre-marital investments, the marriage market is characterized by assortative matching, and endogenously-determined sharing rules form the basis of intra-household allocations. By incorporating pre-marital investments and spousal matching into the collective household model, we are able to identify the fundamental determinants of endogenously determined and maritally sustainable intra-marital sharing rules. In particular, we find that all sharing rules along the assortative order support unconditionally efficient outcomes where both pre-marital investments and intra-household allocations are efficient. The efficiency of both pre-marital choices and household allocations then enables us to show that, for each couple, the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of pre-marital endowments and the sex ratios in the market.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1752.
Length: 35 pages
Date of creation: Sep 2005
Date of revision:
Publication status: published in: Review of Economic Studies, 2007, 74 (2), 507-532
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Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
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