Marriage, Divorce, and Asymmetric Information
In answers to unique questions from the National Survey of Fam- ilies and Households, people reveal their valuations of their options outside of marriage as well as their beliefs about their spouses?options. We use this data to demonstrate several features of household bargaining. First, we document marriages in which one spouse would be happier outside the marriage and the other spouse would be unhappier. This provides a new type of evidence that bargaining takes place. Second, we show that spouses have private information about their outside options, and we estimate a bargaining model that quanti?es the extent of resulting ine¢ ciencies. Third, we incorporate caring preferences and imperfect substitutability of utility into the estimation. Without these features, estimation predicts unrealistically high divorce rates, arising because spouses drive too hard a bargain in the presence of asymmetric information and linear utility. After allowing for interdependent and diminishing marginal util- ity from marital surplus, both of which are identi?ed by incorporating divorce data, our divorce predictions are reasonable. These results show that agents forego their own utility in order to raise the utility of their spouses, and, in doing so, o¤set much of the ine¢ ciency generated by their imperfect knowledge. In contrast, a social planner with only public information about spouses?outside options reduces welfare considerably by keeping far too many couples together. In sum, we ?nd evidence about two key features of marriage ?asymmetric in- formation and interdependent utility ?which are difficult to identify in most studies of interpersonal relationships.
|Date of creation:||Dec 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.virginia.edu/economics/home.html|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Esther Duflo & Christopher Udry, 2004.
"Intrahousehold Resource Allocation in Cote d'Ivoire: Social Norms, Separate Accounts and Consumption Choices,"
NBER Working Papers
10498, National Bureau of Economic Research, Inc.
- Christopher R. Udry & Esther Duflo, 2004. "Intrahousehold Resource Allocation in Cote D'Ivoire: Social Norms, Separate Accounts and Consumption Choices," Yale School of Management Working Papers ysm407, Yale School of Management.
- Esther Duflo & Christopher Udry, 2003. "Intrahousehold Resource Allocation in Côte D'ivoire: Social Norms, Separate Accounts and Consumption Choices," Working Papers 857, Economic Growth Center, Yale University.
- Yeon-Koo Che & Jozsef Sakovics, 2001.
"A Dynamic Theory of Holdup,"
ESE Discussion Papers
74, Edinburgh School of Economics, University of Edinburgh.
- Pierre-André Chiappori & Bernard Fortin & Guy Lacroix, 2001.
"Marriage Market, Divorce Legislation and Household Labor Supply,"
CIRANO Working Papers
- Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
- Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," Cahiers de recherche 0103, Université Laval - Département d'économique.
- Adam, Christopher & Hoddinott, John & Ligon, Ethan A., 2011.
"Dynamic intrahousehold bargaining, matrimonial property law and suicide in Canada,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt4dm5w8v1, Department of Agricultural & Resource Economics, UC Berkeley.
- Adam, Christopher & Hoddinott, John & Ligon, Ethan, 2011. "Dynamic intrahousehold bargaining, matrimonial property law and suicide in Canada," CUDARE Working Paper Series 1113, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Audra Bowlus & Shannon Seitz, 2005.
"Domestic Violence, Employment, and Divorce,"
1075, Queen's University, Department of Economics.
- Stern, Steven, 1996. "Semiparametric estimates of the supply and demand effects of disability on labor force participation," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 49-70.
- Libertad González Luna & Tarja K. Viitanen, 2006.
"The effect of divorce laws on divorce rates in Europe,"
Economics Working Papers
986, Department of Economics and Business, Universitat Pompeu Fabra.
- 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.
- Libertad González & Tarja K. Viitanen, 2006. "The Effect of Divorce Laws on Divorce Rates in Europe," Working Papers 2006003, The University of Sheffield, Department of Economics, revised Mar 2006.
- Gonzalez, Libertad & Viitanen, Tarja, 2006. "The Effect of Divorce Laws on Divorce Rates in Europe," IZA Discussion Papers 2023, Institute for the Study of Labor (IZA).
- Gallant, A. Ronald & Golub, Gene H., 1984.
"Imposing curvature restrictions on flexible functional forms,"
Journal of Econometrics,
Elsevier, vol. 26(3), pages 295-321, December.
- A. Ronald Gallant & Gene H. Golub, 1982. "Imposing Curvature Restrictions on Flexible Functional Forms," Discussion Papers 538, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-54, June.
- Shelly Lundberg & Richard Startz & Steven Stillman, 2001.
"The Retirement-Consumption Puzzle: A Marital Bargaining Approach,"
01-04, RAND Corporation Publications Department.
- Lundberg, Shelly & Startza, Richard & Stillman, Steven, 2003. "The retirement-consumption puzzle: a marital bargaining approach," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1199-1218, May.
- Giulio Fella & Paola Manzini & Marco Mariotti, 2004.
"Does Divorce Law Matter?,"
Journal of the European Economic Association,
MIT Press, vol. 2(4), pages 607-633, 06.
- Fella, Giulio & Manzini, Paola & Mariotti, Marco, 2002. "Does Divorce Law Matter?," IZA Discussion Papers 439, Institute for the Study of Labor (IZA).
- Giulio Fella & Paola Manzini & Marco Mariotti, 2002. "Does Divorce Law Matter?," Working Papers 454, Queen Mary University of London, School of Economics and Finance.
- repec:bla:restud:v:74:y:2007:i:3:p:857-895 is not listed on IDEAS
- Gallant, A. Ronald, 1982. "Unbiased determination of production technologies," Journal of Econometrics, Elsevier, vol. 20(2), pages 285-323, November.
- Maurizio Mazzocco, 2007. "Household Intertemporal Behaviour: A Collective Characterization and a Test of Commitment," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 857-895.
- Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
- Ligon, Ethan, 2002. "Dynamic bargaining in households (with application to Bangladesh)," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1t52k4c5, Department of Agricultural & Resource Economics, UC Berkeley.
- Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32.
When requesting a correction, please mention this item's handle: RePEc:vir:virpap:385. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Debby Stanford)
If references are entirely missing, you can add them using this form.