 United but (un)equal: human capital, probability of divorce, and the marriage contractHelmuth Cremer,
Pierre Pestieau and
Kerstin Roeder
PSE-Ecole d'économie de Paris (Postprint) from HAL 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. Keywords: Human capital; Divorce; Marriage (search for similar items in EconPapers) Published in Journal of Population Economics, 2015, 28 (1), pp.195-217. ⟨10.1007/s00148-014-0504-1⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-01157442 DOI: 10.1007/s00148-014-0504-1 Access Statistics for this paper More papers in PSE-Ecole d'économie de Paris (Postprint) from HAL |
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