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Household Relational Contracts for Marriage, Fertility and Divorce

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  • Matthias Fahn
  • Ray Rees

Abstract

This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed among partners, there is a potential conflict between individually optimal and efficient, i.e. surplus maximizing, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the effects of policy variables such as rights of access to children post-separation and wealth division/alimony rules, as well as the legal costs of divorce, on the interrelationships among the decisions on marriage, fertility and divorce.

Suggested Citation

  • Matthias Fahn & Ray Rees, 2011. "Household Relational Contracts for Marriage, Fertility and Divorce," CESifo Working Paper Series 3655, CESifo.
  • Handle: RePEc:ces:ceswps:_3655
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    Cited by:

    1. 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.
    2. Patricia Apps & Yuri Andrienko & Ray Rees, 2012. "Risk and Saving in Two-Person Households: More Scope for Precautionary Saving," CEPR Discussion Papers 674, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    3. Fahn, Matthias & Hadjer, Tahmina, 2015. "Optimal contracting with private military and security companies," European Journal of Political Economy, Elsevier, vol. 37(C), pages 220-240.
    4. Elisabeth Gugl & Linda Welling, 2017. "Efficiency of Family Bargaining Models with Renegotiation: The Role of Transferable Utility across Periods," Studies in Microeconomics, , vol. 5(1), pages 53-83, June.

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    More about this item

    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
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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