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Relational contracts for household formation, fertility choice and separation

Author

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  • Matthias Fahn

    () (University of Munich)

  • Ray Rees

    () (University of Munich
    University of Warwick)

  • Amelie Wuppermann

    () (University of Munich)

Abstract

Abstract This paper applies the theory of relational contracts to a model in which a couple decides upon fertility and subsequently on continuation of the relationship. We formalize the idea that within-household-cooperation can be supported by selfinterest. Since the costs of raising children—a household public good—are unequally distributed between partners, a conflict between individually optimal and efficient decisions exists. Side-payments can support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires stable relationships and credible punishment threats.Within this framework, we analyze the effects of separation costs and post-separation alimony payments on couples’ fertility decisions. We derive the predictions that higher separation costs and higher alimony payments facilitate cooperation and hence increase fertility. We present empirical evidence based on a recent German reform that reduced rights to post-divorce alimony payments. We find that this reform reduced in-wedlock fertility.

Suggested Citation

  • Matthias Fahn & Ray Rees & Amelie Wuppermann, 2016. "Relational contracts for household formation, fertility choice and separation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(2), pages 421-455, April.
  • Handle: RePEc:spr:jopoec:v:29:y:2016:i:2:d:10.1007_s00148-015-0580-x
    DOI: 10.1007/s00148-015-0580-x
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    Cited by:

    1. Bredtmann, Julia & Vonnahme, Christina, 2017. "Less alimony after divorce: Spouses' behavioral response to the 2008 alimony reform in Germany," Ruhr Economic Papers 702, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Household economics; Relational contracts; Fertility; Alimony payments;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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