United but (Un-)Equal: Human Capital, Probability of Divorce and the Marriage Contract
AbstractThis paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization (one of the spouses uses up all the education resources) is optimal with no divorce risk. Symmetry in education (both spouses receive an equal amount of education) then acts like an insurance device in case of divorce particularly when the institutions do not compensate for differences in earnings. But, at the same time symmetry in education is less efficient than the extreme specialization. This is the basic tradeoff underlying our analysis. We show that the symmetric allocation will become more attractive as the probability of divorce increases, if risk aversion is high and/or labor supply elasticity is low. However, it is only a “second-best” solution as the insurance protection is achieved at the expense of an efficiency loss. Efficiency can be restored through suitably designed marriage contracts because they can provide the appropriate insurance against divorce to a couple who opts for specialization. Finally, we study how the (economic) use of marriage is affected by the possibility of divorce.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7038.
Length: 28 pages
Date of creation: Nov 2012
Date of revision:
Publication status: forthcoming in: Journal of Population Economics, 2014.
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Other versions of this item:
- Cremer, Helmuth & Pestieau, Pierre & Roeder, Kerstin, 2012. "United but (un)equal: human capital, probability of divorce and the marriage contract," IDEI Working Papers 755, Institut d'Économie Industrielle (IDEI), Toulouse.
- Cremer, Helmuth & Pestieau, Pierre & Roeder, Kerstin, 2012. "United but (un)equal: human capital, probability of divorce and the marriage contract," TSE Working Papers 12-363, Toulouse School of Economics (TSE).
- Helmuth Cremer & Pierre Pestieau & Kerstin Roeder, 2012. "United but (Un)Equal: Human Capital, Probability of Divorce and the Marriage Contract," CESifo Working Paper Series 4020, CESifo Group Munich.
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- K36 - Law and Economics - - Other Substantive Areas of Law - - - Family and Personal Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-DEM-2012-12-22 (Demographic Economics)
- NEP-HRM-2012-12-22 (Human Capital & Human Resource Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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