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The Insurance Role of Marriage

Author

Listed:
  • Fang Yang

    (Louisiana State University)

  • Mariacristina De Nardi

    (Federal Reserve Bank of Chicago)

Abstract

Marriage is an institution that also helps insure shocks. Despite this and the prevalence of marriage, very little is known on how effectively marriage insures households against income or health risks and how being married affects labor supply and savings. We develop a framework with both single and married people, in which single people meet partners and everyone experiences labor productivity shocks, medical costs shocks, life span risk, and married people also experience divorce risk. People can self-insure by saving and by choosing their labor supply. We also allow for reversibility of social security and pension payments to the surviving spouse in case of death of one of the spouses and for differential tax treatment of married and single people. In this framework, we study the insurance benefits of marriage, both at the individual and at the aggregate level.

Suggested Citation

  • Fang Yang & Mariacristina De Nardi, 2016. "The Insurance Role of Marriage," 2016 Meeting Papers 427, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:427
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    File URL: https://economicdynamics.org/meetpapers/2016/paper_427.pdf
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    References listed on IDEAS

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    1. Goda, Gopi Shah & Shoven, John B. & Slavov, Sita Nataraj, 2013. "Does widowhood explain gender differences in out-of-pocket medical spending among the elderly?," Journal of Health Economics, Elsevier, vol. 32(3), pages 647-658.
    2. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
    3. Ortigueira, Salvador & Siassi, Nawid, 2013. "How important is intra-household risk sharing for savings and labor supply?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 650-666.
    4. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2010. "The Macroeconomic Implications of Rising Wage Inequality in the United States," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 681-722, August.
    5. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(2), pages 317-339, June.
    6. David A. Love, 2010. "The Effects of Marital Status and Children on Savings and Portfolio Choice," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 385-432, January.
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