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Title:Household relational contracts for marriage, fertility and divorce PDF Logo
Authors:Fahn, Matthias
Rees, Ray
Issue Date:2011
Series/Report no.:CESifo working paper: Public Finance 3655
Abstract:This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed among partners, there is a potential conflict between individually optimal and efficient, i.e. surplus maximizing, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the effects of policy variables such as rights of access to children post-separation and wealth division/alimony rules, as well as the legal costs of divorce, on the interrelationships among the decisions on marriage, fertility and divorce.
JEL:C73
D13
J12
J13
J24
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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