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Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining

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  • Saku Aura

    (University of Missouri)

Abstract

This paper studies a married couple's dynamic investment and consumption choices under the assumption that the couple cannot commit across time 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 fully efficient outcome in a simple model while it is shown that under a community-property regime the couple is unlikely to attain full efficiency. The effect of the 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://128.118.178.162/eps/mic/papers/0304/0304002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0304002.

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Length: 31 pages
Date of creation: 04 Apr 2003
Date of revision:
Handle: RePEc:wpa:wuwpmi:0304002

Note: Type of Document - PDF; prepared on PC; pages: 31; figures: none
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Web page: http://128.118.178.162

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Keywords: Marital Bargaining; Dynamic Models;

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References

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  1. Saku Aura, 2002. "Does the Balance of Power Within a Family Matter? The Case of the Retirement Equity Act," CESifo Working Paper Series 734, CESifo Group Munich.
  2. Esther Duflo, 2000. "Grandmothers and Granddaughters: Old Age Pension and Intra-household Allocation in South Africa," NBER Working Papers 8061, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
  5. 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.
  6. Browning, Martin, 2000. " The Saving Behaviour of a Two-Person Household," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(2), pages 235-51, June.
  7. repec:bla:restud:v:74:y:2007:i:3:p:857-895 is not listed on IDEAS
  8. Shelly Lundberg & Richard Startz & Steven Stillman, 2001. "The Retirement-Consumption Puzzle: A Marital Bargaining Approach," Working Papers 01-04, RAND Corporation Publications Department.
  9. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  10. 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.
  11. 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.
  12. 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.
  13. 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..
  14. 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.
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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. 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.
  3. Shelly Lundberg & Robert Pollak, 2003. "Efficiency in Marriage," Review of Economics of the Household, Springer, vol. 1(3), pages 153-167, September.
  4. Rasul, Imran, 2008. "Household bargaining over fertility: Theory and evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 86(2), pages 215-241, June.
  5. Jon Strand, 2005. "Individual and Household Values of Mortality Reductions with Intrahousehold Bargaining," Journal of Risk and Uncertainty, Springer, vol. 31(2), pages 217-236, September.
  6. Stefania Marcassa, 2013. "Divorce Laws and Divorce Rate in the U.S," Post-Print hal-00865640, HAL.
  7. Helmut Rainer, 2005. "Should We Write Prenuptial Contracts?," Discussion Paper Series, Department of Economics 200514, Department of Economics, University of St. Andrews.
  8. 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.
  9. 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).
  10. Katarina Nordblom, 2004. "Cohabitation and Marriage in a Risky World," Review of Economics of the Household, Springer, vol. 2(3), pages 325-340, 04.
  11. 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.
  12. Lundberg, Shelly, 2005. "Men and islands: Dealing with the family in empirical labor economics," Labour Economics, Elsevier, vol. 12(4), pages 591-612, August.
  13. Filippo Pericoli & Luigi Ventura, 2012. "Family dissolution and precautionary savings: an empirical analysis," Review of Economics of the Household, Springer, vol. 10(4), pages 573-595, December.
  14. Robert A. Pollak, 2005. "Bargaining Power in Marriage: Earnings, Wage Rates and Household Production," NBER Working Papers 11239, National Bureau of Economic Research, Inc.

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