Marriage Timing and Forward Contracts in Marriage

We study how contractual incompleteness affects marriage contracts, including premarital investments in human capital, age of marriage, and the timing of payments. We formalise different solutions to the contractual problem and document their use across societies and at different points in history. The most common form of marriage arrangement today is one where human capital investments precede the marriage agreement. However, two other forms of contractual arrangements have also been prevalent in the past: (i) transfer of the bride to the groom's family prior to human capital investments (e.g. pre-pubescent marriages); (ii) a forward contract specifies investments to be made in the bride before her transfer to the groom's family (e.g. cradle betrothal). Each alternative suffers from a form of inefficiency (due, respectively, to search costs, agency problems in childrearing, and underinvestment due to the classical hold-up problem). The model generates predictions regarding the contractual form adopted as a function of the prevailing production technology, population density, and credit constraints. We argue that a theory of marriages that allows contractual form to be endogenous provide insights about the impact of development policies that are missed when the contractual form is taken as given.