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United but (un)equal: human capital, probability of divorce, and the marriage contract

Author

Listed:
  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

  • Pierre Pestieau

    (CEPR - Center for Economic Policy Research, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Kerstin Roeder

    (LMU - Ludwig Maximilian University [Munich] = Ludwig Maximilians Universität München)

Abstract

This paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization is optimal with no divorce risk. Couples can self-insure through savings which offers some protection to the uneducated spouse, but at the expense of a distortion. Alternatively, for large divorce probabilities, symmetry in education, where both spouses receive an equal amount of education, may be optimal. This eliminates the risk associated with the lack of education, but reduces the efficiency of education choices. We show that the symmetric allocation will become more attractive as the probability of divorce increases, if risk aversion is high and/or labor supply elasticity is low. However, it is only a "second-best" solution as insurance protection is achieved at the expense of an efficiency loss. Finally, we study how the (economic) use of marriage is affected by the possibility of divorce.

Suggested Citation

  • Helmuth Cremer & Pierre Pestieau & Kerstin Roeder, 2015. "United but (un)equal: human capital, probability of divorce, and the marriage contract," PSE-Ecole d'économie de Paris (Postprint) halshs-01157442, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01157442
    DOI: 10.1007/s00148-014-0504-1
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    Cited by:

    1. Andrew Grant & Steve Satchell, 2019. "Endogenous divorce risk and investment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(3), pages 845-876, July.
    2. Togzhan Bakhtybaevna Zhunussova, 2022. "Influence of Legal Traditions and Legal Culture on the Institution of Marriage Contracts and the Possibility of its Improvement: The Experience of Kazakhstan," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, September.

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    Keywords

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    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • K36 - Law and Economics - - Other Substantive Areas of Law - - - Family and Personal Law

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