Journal Article

Building the Family Nest: Premarital Investments, Marriage Markets, and Spousal Allocations

Murat Nick and P. Randall Walsh

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 74, issue 2, pages 507-535
Published in print April 2007 | ISSN: 0034-6527
Published online April 2007 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2007.00429.x
Building the Family Nest: Premarital Investments, Marriage Markets, and Spousal Allocations

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  • Household Behaviour and Family Economics
  • Demographic Economics

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We develop a transferable utility model of the household in which the marriage market is characterized by (negative or positive) assortative matching, and spousal allocations are determined by premarital investments. We demonstrate that all sharing rules along the assortative order support efficient outcomes both in terms of premarital investments and intra-household allocations. The efficiency of premarital choices and household allocations then enables us to show that, for each couple, the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of premarital endowments and the sex ratios in the market. According to our results, transfers among spouses occur on two margins: premarital investments and intra-marital spousal allocations. Asymmetries in the sex ratios in the marriage markets produce gender differences in premarital investments and consumption that are larger for individuals with small premarital endowments than those with larger endowments. A corollary of these findings is that, when men are in short supply in the marriage markets, women can invest more than men even when the returns to investment are lower or the costs are higher for women.

Keywords: D13; J12; J16

Journal Article.  11366 words.  Illustrated.

Subjects: Household Behaviour and Family Economics ; Demographic Economics

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