United but (un)equal: human capital, probability of divorce and the marriage contract
AbstractThis paper studies how the risk of divorce a¤ects 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 di¤erences in earnings. But, at the same time symmetry in education is less e¢ cient than the extreme specialization. This is the basic tradeo¤ 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 e¢ ciency loss. E¢ ciency 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 a¤ected by the possibility of divorce.
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Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-363.
Date of creation: Nov 2012
Date of revision:
post-marital education; marriage contract; divorce;
Other versions of this item:
- 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.
- 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," IZA Discussion Papers 7038, Institute for the Study of Labor (IZA).
- 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-2013-01-07 (All new papers)
- NEP-DEM-2013-01-07 (Demographic Economics)
- NEP-HRM-2013-01-07 (Human Capital & Human Resource Management)
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