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Relational contracts for household formation, fertility choice and separation

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  • Fahn, Matthias
  • Rees, Ray
  • Wuppermann, Amelie

Abstract

This paper applies the theory of relational contracts to a model in which a couple decides upon fertility and subsequently on continuation of the relationship. We formalize the idea that within-household-cooperation can be supported by self-interest. Since the costs of raising children-a household public good-are unequally distributed between partners, a conflict between individually optimal and efficient decisions exists. Side-payments can support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires stable relationships and credible punishment threats. Within this framework, we analyze the effects of separation costs and post-separation alimony payments on couples' fertility decisions. We derive the predictions that higher separation costs and higher alimony payments facilitate cooperation and hence increase fertility. We present empirical evidence based on a recent German reform that reduced rights to post-divorce alimony payments. We find that this reform reduced in-wedlock fertility.

Suggested Citation

  • Fahn, Matthias & Rees, Ray & Wuppermann, Amelie, 2016. "Relational contracts for household formation, fertility choice and separation," Munich Reprints in Economics 43526, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:43526
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    Cited by:

    1. Bredtmann, Julia & Vonnahme, Christina, 2017. "Less alimony after divorce: Spouses' behavioral response to the 2008 alimony reform in Germany," Ruhr Economic Papers 702, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Görges, Luise, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Labour Economics, Elsevier, vol. 72(C).
    3. Chigavazira, Abraham & Fisher, Hayley & Robinson, Tim & Zhu, Anna, 2019. "The Consequences of Extending Equitable Property Division Divorce Laws to Cohabitants," Working Papers 2019-02, University of Sydney, School of Economics.
    4. Luise Görges, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Working Paper Series in Economics 400, University of Lüneburg, Institute of Economics.
    5. Chen, Shuai, 2019. "Marriage, minorities, and mass movements," Other publications TiSEM 9cb1b11d-12e6-46a8-adca-4, Tilburg University, School of Economics and Management.
    6. Julia Bredtmann & Christina Vonnahme, 2019. "Less money after divorce – how the 2008 alimony reform in Germany affected spouses’ labor supply, leisure and marital stability," Review of Economics of the Household, Springer, vol. 17(4), pages 1191-1223, December.

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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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