Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104423
Authors: 
Fahn, Matthias
Rees, Ray
Year of Publication: 
2014
Series/Report no.: 
Munich Discussion Paper 2014-13
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 between partners and children are a household public good, there is a conflict between individually optimal and efficient, i.e. surplus maximising, 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 framework, we analyze the effects of policy variables such as the costs of divorce and post-divorce income payments on the interrelationships among the decisions on marriage, fertility and divorce.
Subjects: 
relational contracts
cohabitation
marriage
fertility
divorce
JEL: 
C73
D13
J12
J13
J24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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