Matouschek, N.; Rasul, I.; (2008) The economics of the marriage contract: theories and evidence. (ELSE Working Papers 306). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

In this paper we ask, what is the role of the marriage contract? We address this question by first formalizing three prominent hypotheses on why people marry. These are based on marriage providing an exogenous payoff to married partners; marriage as a commitment device; and marriage as a signaling device. The comparative static we focus on is how a reduction in the cost of divorce affects the propensity to divorce for couples at any given duration of marriage. Each theory highlights that divorce costs affect the propensity to divorce both through an effect on married couples directly — an incentive effect; and through an effect on the composition of couples that decide to marry — a selection effect. We then bring these alternative views of the marriage contract to bear on the data using individual marriage and divorce certificate data from the US. We exploit variation in the timing of the adoption of unilateral divorce law across states to proxy a one-off and permanent reduction in divorce costs. The disaggregated nature of the data allows us to identify the incentive and selection effects of lower divorce costs by exploiting the variation in divorce propensities across marriages of different duration within the same state and year. The results suggest the dominant reason why individuals enter marriage contracts is that they serve as a commitment device.

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