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Efficiency in Marriage

  • Shelly Lundberg

    ()

  • Robert Pollak

    ()

Economists usually assume that bargaining in marriage leads to efficient outcomes. The most convincing rationale for this assumption is the belief that efficient allocations are likely to emerge from repeated interactions in stationary environments, and that marriage provides such an environment. This paper argues that when a current decision affects future bargaining power, inefficient outcomes are plausible. If the spouses could make binding commitments–in effect, commitments to refrain from exploiting the future bargaining advantage–then the inefficiency would disappear. But spouses seldom can make binding commitments regarding allocation within marriage. To investigate the efficiency of bargaining within marriage when choices affect future bargaining power, we consider the location decisions of two-earner couples. Initial location decisions are transparent and analytically tractable examples of choices likely to affect future bargaining power, but the logic of our analysis applies to many other decisions. For example, decisions about education, fertility, and labor force participation are also potential sources of inefficiency. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1025041316091
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Article provided by Springer in its journal Review of Economics of the Household.

Volume (Year): 1 (2003)
Issue (Month): 3 (September)
Pages: 153-167

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Handle: RePEc:kap:reveho:v:1:y:2003:i:3:p:153-167
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=109451

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  1. Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-54, June.
  2. Basu, Kaushik, 2001. "Gender and Say: A Model of Household Behavior with Endogenously-Determined Balance of Power," Working Papers 01-01, Cornell University, Center for Analytic Economics.
  3. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  4. Saku Aura, 2002. "Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining," CESifo Working Paper Series 801, CESifo Group Munich.
  5. Ligon, Ethan, 2002. "Dynamic bargaining in households (with an application to Bangladesh)," CUDARE Working Paper Series 972, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  6. Kai A. Konrad & Kjell Erik Lommerud, 2000. "The bargaining family revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 471-487, May.
  7. Robert Pollak, 2003. "Gary Becker's Contributions to Family and Household Economics," Review of Economics of the Household, Springer, vol. 1(1), pages 111-141, January.
  8. Lundberg, Shelly & Startza, Richard & Stillman, Steven, 2003. "The retirement-consumption puzzle: a marital bargaining approach," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1199-1218, May.
  9. Mincer, Jacob, 1978. "Family Migration Decisions," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 749-73, October.
  10. Shelly Lundberg & Robert A. Pollak, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-158, Fall.
  11. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December.
  12. Junsen Zhang & William Chan, 1999. "Dowry and Wife's Welfare: A Theoretical and Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 786-808, August.
  13. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
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