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Competing Premarital Investment

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  • Michael Peters
  • Aloysius Siow

Abstract

This paper studies pre-marital parental investments in their chil- dren's wealth where spousal wealth is a public good in marriage. By investing in their children's wealth, parents increase the wealth of their children and the quality of the spouses that their children can marry. In large marriage markets, the hedonic return to investment internal- izes all the external benefits of pre-marital investment in wealth so that the competitive equilibrium is efficient. Marriage market compe- tition also increases investments in small marriage markets relative to no competition, but equilibrium investments are not efficient.

Suggested Citation

  • Michael Peters & Aloysius Siow, 2001. "Competing Premarital Investment," Working Papers peters-01-02, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:peters-01-02
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    References listed on IDEAS

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