United but (Un-)Equal: Human Capital, Probability of Divorce and the Marriage Contract
This paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization (one of the spouses uses up all the education resources) is optimal with no divorce risk. Symmetry in education (both spouses receive an equal amount of education) then acts like an insurance device in case of divorce particularly when the institutions do not compensate for differences in earnings. But, at the same time symmetry in education is less efficient than the extreme specialization. This is the basic tradeoff underlying our analysis. 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 the insurance protection is achieved at the expense of an efficiency loss. Efficiency can be restored through suitably designed marriage contracts because they can provide the appropriate insurance against divorce to a couple who opts for specialization. Finally, we study how the (economic) use of marriage is affected by the possibility of divorce.
|Date of creation:||Nov 2012|
|Date of revision:|
|Publication status:||published in: Journal of Population Economics, 2015, 28 (1), 195-217|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Becker, Gary S, 1974.
"A Theory of Marriage: Part II,"
Journal of Political Economy,
University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
- CREMER, Helmuth & PESTIEAU, Pierre & RACIONERO, Mario, .
"Unequal wages for equal utilities,"
CORE Discussion Papers RP
2369, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Konrad, K.A. & Lommerud, K.E., 2000.
"The Bargaining Family Revisited,"
Norway; Department of Economics, University of Bergen
212, Department of Economics, University of Bergen.
- Becker, Gary S & Landes, Elisabeth M & Michael, Robert T, 1977. "An Economic Analysis of Marital Instability," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1141-87, December.
- Fernández, Raquel & Wong, Joyce Cheng, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," CEPR Discussion Papers 8627, C.E.P.R. Discussion Papers.
- Libertad González & Berkay Özcan, 2008.
"The risk of divorce and household saving behavior,"
LSE Research Online Documents on Economics
38463, London School of Economics and Political Science, LSE Library.
- Libertad González Luna & Berkay Özcan, 2008. "The risk of divorce and household saving behavior," Economics Working Papers 1111, Department of Economics and Business, Universitat Pompeu Fabra.
- Gonzalez, Libertad & Özcan, Berkay, 2008. "The Risk of Divorce and Household Saving Behavior," IZA Discussion Papers 3726, Institute for the Study of Labor (IZA).
- Apps,Patricia & Rees,Ray, 2009.
"Public Economics and the Household,"
Cambridge University Press, number 9780521887878, November.
- Fernández, Raquel & Wong, Joyce Cheng, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," IZA Discussion Papers 6046, Institute for the Study of Labor (IZA).
- Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
- Konrad, Kai A & Lommerud, Kjell Erik, 1995. " Family Policy with Non-cooperative Families," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 581-601, December.
- Borenstein, Severin & Cournat, Paul N, 1989. "How to Carve a Medical Degree: Human Capital Assets in Divorce Settlements," American Economic Review, American Economic Association, vol. 79(5), pages 992-1009, December.
- Lommerud, Kjell Erik, 1989. "Marital Division of Labor with Risk of Divorce: The Role of "Voice" Enforcement of Contracts," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 113-27, January.
- Raquel Fernández & Joyce Cheng Wong, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," NBER Working Papers 17508, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7038. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.