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A Human Capital-Based Theory of Postmarital Residence Rules

  • Matthew J. Baker
  • Joyce P. Jacobsen

In premodern societies, the residence of a newly wedded couple is often decided by custom. We formulate a theory of optimal postmarital residence rules based on contracting problems created by the nature of premarriage human capital investments. We argue that a fixed postmarital residence rule may mitigate a holdup problem by specifying marriage terms and limiting possibilities for renegotiation; the trade-off is that the rule may prohibit beneficial renegotiation of postmarital location. A point of interest of our approach is that the magnitude and direction of transfers accompanying marriage are endogenous. We apply our theoretical results to understanding cross-cultural postmarital residence patterns. We find some predictive ability in variables related to outside options, control over the environment, and potential degree of social control. Copyright 2007, Oxford University Press.

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Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

Volume (Year): 23 (2007)
Issue (Month): 1 (April)
Pages: 208-241

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Handle: RePEc:oup:jleorg:v:23:y:2007:i:1:p:208-241
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