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Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining

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Abstract

This paper studies married couples dynamic investment and consumption choices under the assumption that the couple cannot commit across time to not to renegotiate their decisions. The inefficiencies that can arise are characterized. Efficiency properties of different divorce asset division regimes are examined. A stylized common law regime is shown to lead to a fully efficiency in a simple model while it is shown that under community property regime the couple is unlikely to attain full efficiency. The effect of inability to commit across time on the savings level is examined under a tractable special case of the model.

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File URL: http://economics.missouri.edu/working-papers/2002/WP0217_aura.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0217.

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Length: 33 pgs.
Date of creation: 25 Sep 2002
Date of revision:
Handle: RePEc:umc:wpaper:0217

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References

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  1. Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Discussion Papers 96-09, University of Copenhagen. Department of Economics, revised Jan 1996.
  2. Aura, Saku, 2005. "Does the balance of power within a family matter? The case of the Retirement Equity Act," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1699-1717, September.
  3. Shelly Lundberg & Richard Startz & Steven Stillman, 2001. "The Retirement-Consumption Puzzle: A Marital Bargaining Approach," Working Papers 01-04, RAND Corporation Publications Department.
  4. repec:bla:restud:v:74:y:2007:i:3:p:857-895 is not listed on IDEAS
  5. Lundberg, S.J. & Pollak, R.A. & Wales, T.J., 1994. "Do Husbands and Wives Pool Their Resources? Evidence from U.K. Child Benefit," Discussion Papers in Economics at the University of Washington 94-6, Department of Economics at the University of Washington.
  6. Shelly J. Lundberg & Jennifer Ward-Batts, 2000. "Saving for Retirement: Household Bargaining and Household Net Worth," Working Papers wp004, University of Michigan, Michigan Retirement Research Center.
  7. Esther Duflo, 2003. "Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa," World Bank Economic Review, World Bank Group, vol. 17(1), pages 1-25, June.
  8. Maurizio Mazzocco, 2007. "Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 857-895.
  9. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 1998. "Mutual Insurance, Individual Savings and Limited Commitment," Keele Department of Economics Discussion Papers (1995-2001) 98/14, Department of Economics, Keele University.
  10. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  11. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  12. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-49, June.
  13. Dnes, Antony W., 1999. "Applications of economic analysis to marital law: concerning a proposal to reform the discretionary approach to the division of marital assets in England and Wales," International Review of Law and Economics, Elsevier, vol. 19(4), pages 533-552, December.
  14. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
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Citations

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Cited by:
  1. Libertad González & Berkay Özcan, 2008. "The risk of divorce and household saving behavior," LSE Research Online Documents on Economics 38463, London School of Economics and Political Science, LSE Library.
  2. Strand, Jon, 2009. "Individual and household value of mortality reductions with intrahousehold bargaining," HERO On line Working Paper Series 2004:2, Oslo University, Health Economics Research Programme.
  3. Alessandra Voena, 2011. "Yours, Mine and Ours: Do Divorce Laws Affect the Intertemporal Behavior of Married Couples?," Discussion Papers 10-022, Stanford Institute for Economic Policy Research.
  4. Shelly Lundberg & Robert A. Pollak, 2001. "Efficiency in Marriage," NBER Working Papers 8642, National Bureau of Economic Research, Inc.
  5. Marcassa Stefania, 2013. "Divorce laws and divorce rate in the US," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 39, August.
  6. Pollak, Robert, 2007. "Family Bargaining and Taxes: A Prolegomenon to the Analysis of Joint Taxation," IZA Discussion Papers 3109, Institute for the Study of Labor (IZA).
  7. Katarina Nordblom, 2004. "Cohabitation and Marriage in a Risky World," Review of Economics of the Household, Springer, vol. 2(3), pages 325-340, 04.
  8. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
  9. Rasul, Imran, 2008. "Household bargaining over fertility: Theory and evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 86(2), pages 215-241, June.
  10. Robert A. Pollak, 2005. "Bargaining Power in Marriage: Earnings, Wage Rates and Household Production," NBER Working Papers 11239, National Bureau of Economic Research, Inc.
  11. Lundberg, Shelly, 2005. "Men and islands: Dealing with the family in empirical labor economics," Labour Economics, Elsevier, vol. 12(4), pages 591-612, August.
  12. Malapit, Hazel Jean L., 2012. "Why do spouses hide income?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(5), pages 584-593.
  13. Alessandra Voena, 2010. "Yours, Mine and Ours: Do Divorce Laws affect the Intertemporal Behavior of Married Couples??," 2010 Meeting Papers 1329, Society for Economic Dynamics.

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