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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.

Suggested Citation

  • Rainer, Helmut, 2007. "Should we write prenuptial contracts?," Munich Reprints in Economics 19819, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:19819
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Martijn Huysmans, 2018. "Heterogeneity, Vetoes, and Exit Clauses in Federal Systems," CESifo Working Paper Series 7178, CESifo Group Munich.
    2. Éric Langlais, 2010. "On unilateral divorce and the “selection of marriages” hypothesis," Recherches économiques de Louvain, De Boeck Université, vol. 76(3), pages 229-256.
    3. Meier, Volker & Rainer, Helmut, 2012. "On the optimality of joint taxation for noncooperative couples," Labour Economics, Elsevier, vol. 19(4), pages 633-641.
    4. Marco Francesconi & Helmut Rainer & Wilbert vanderKlaauw, 2009. "The Effects of In-Work Benefit Reform in Britain on Couples: Theory and Evidence," Economic Journal, Royal Economic Society, vol. 119(535), pages 66-100, February.
    5. Alessandra Voena, 2011. "Yours, Mine and Ours: Do Divorce Laws Affect the Intertemporal Behavior of Married Couples?," Discussion Papers 10-022, Stanford Institute for Economic Policy Research.
    6. Nicolas Frémeaux & Marion Leturcq, 2013. "Plus ou moins mariés : l'évolution du mariage et des régimes matrimoniaux en France," Économie et Statistique, Programme National Persée, vol. 462(1), pages 125-151.
    7. Hanan G. Jacoby & Ghazala Mansuri, 2010. "Watta Satta: Bride Exchange and Women's Welfare in Rural Pakistan," American Economic Review, American Economic Association, vol. 100(4), pages 1804-1825, September.
    8. repec:kap:jfamec:v:38:y:2017:i:2:d:10.1007_s10834-016-9507-2 is not listed on IDEAS
    9. González, Libertad & Viitanen, Tarja K., 2009. "The effect of divorce laws on divorce rates in Europe," European Economic Review, Elsevier, vol. 53(2), pages 127-138, February.
    10. Chiappori, Pierre-André & Iyigun, Murat & Weiss, Yoram, 2008. "An Assignment Model with Divorce and Remarriage," IZA Discussion Papers 3892, Institute for the Study of Labor (IZA).
    11. Alessandro Cigno, 2014. "Is Marriage as Good as a Contract?," CESifo Economic Studies, CESifo, vol. 60(3), pages 599-612.
    12. Fisher, H., 2011. "Divorce Property Division and the Decision to Marry or Cohabit," Cambridge Working Papers in Economics 1101, Faculty of Economics, University of Cambridge.
    13. Smith, Ian, 2007. "Property division on divorce with inequity aversion," International Review of Law and Economics, Elsevier, vol. 27(2), pages 111-128.
    14. Christine Atteneder & Martin Halla, 2006. "Bargaining at divorce: The allocation of custody," Economics working papers 2006-18, Department of Economics, Johannes Kepler University Linz, Austria, revised Jan 2007.
    15. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    16. Donni, Olivier, 2014. "Over-investment in marriage-specific capital," Mathematical Social Sciences, Elsevier, vol. 67(C), pages 34-43.
    17. repec:eee:exehis:v:68:y:2018:i:c:p:132-142 is not listed on IDEAS
    18. Tümer Kapan, 2010. "Property Division Laws: The Effects on Labor Supply and Household Bargaining," 2010 Meeting Papers 1127, Society for Economic Dynamics.

    More about this item

    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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