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Should we write prenuptial contracts?

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  • Rainer, Helmut

Abstract

A successful marriage requires for both parties to make investments in their relationship and marital assets. How such assets would be divided if and when the parties divorce is an important factor determining each party’s ex ante investment incentives. Using the incomplete contracting approach, we characterize the optimal asset division rule, one that provides the parties with the best investment incentives. We then discuss the circumstances under which the spouses would agree, in equilibrium, to contract out state-imposed rules governing the allocation of marital assets upon divorce. We conclude by exploring the implications of our results in the context of various asset division rules currently discussed by policy-makers.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19819.

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Date of creation: 2007
Date of revision:
Publication status: Published in European Economic Review 2 51(2007): pp. 337-363
Handle: RePEc:lmu:muenar:19819
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Find related papers by JEL classification:
  • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
  • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
  • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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