Article (Scientific journals)
United but (un)equal: human capital, probability of divorce, and the marriage contract
Cremer, Helmuth; Pestieau, Pierre; Roeder, Kerstin
2015In Journal of Population Economics, 28, p. 195-217
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Keywords :
marriage; divorce
Abstract :
This paper studies how the risk of divorce affects the human capital decisions of a young couple. We consider a setting where complete specialization is optimal with no divorce risk. Couples can self-insure through savings which offers some protection to the uneducated spouse, but at the expense of a distortion. Alternatively, for large divorce probabilities, symmetry in education, where both spouses receive an equal amount of education, may be optimal. This eliminates the risk associated with the lack of education, but reduces the efficiency of education choices. We show that the symmetric allocation will become more attractive as the probability of divorce increases, if risk aversion is high and/or labor supply elasticity is low. However, it is only a “second-best” solution as insurance protection is achieved at the expense of an efficiency loss. Finally, we study how the (economic) use of marriage is affected by the possibility of divorce.
Disciplines :
Economic systems & public economics
Author, co-author :
Cremer, Helmuth
Pestieau, Pierre  ;  Université de Liège > HEC - École de gestion de l'ULiège > HEC-Ecole de gestion
Roeder, Kerstin
Language :
English
Title :
United but (un)equal: human capital, probability of divorce, and the marriage contract
Publication date :
2015
Journal title :
Journal of Population Economics
ISSN :
0933-1433
eISSN :
1432-1475
Publisher :
Springer Science & Business Media B.V., New York, United States - New York
Volume :
28
Pages :
195-217
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 03 May 2015

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