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Marriage, Markets and Money: A Coasian Theory of Household Formation

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  • Randall Wright

    (U Wisconsin)

Abstract

This paper integrates search-based models of marriage and money. We think about households as organizations, the way Coase thinks about firms, as alternatives to markets that become more attractive when transactions costs increase. In the model, individuals consume market- and home-produced goods, and home production is facilitated by marriage. Market frictions, including taxes, search and bargaining problems, can increase the propensity to marry. The inflation tax, in particular, encourages marriage iff being single is cash intensive. Micro data confirm that singles use cash more than married people. We then use macro data, over many countries and years, to see how marriage responds to inflation, taxation and other variables.

Suggested Citation

  • Randall Wright, 2014. "Marriage, Markets and Money: A Coasian Theory of Household Formation," 2014 Meeting Papers 237, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:237
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