"Collateralized Marriage" Corinne Low, Wharton Business School, University of Pennsylvania

Date
Aug 31, 1:20 pm2:35 pm
Location
Zoom
Event Description

Corinne Low, assistant professor at the Business Economics and Public Policy Department at Wharton Business School, University of Pennsylvania, is a visiting assistant professor in the Section during the 2020-2021 academic year.

Collateralized Marriage, Jeanne Lafortune and Corinne Low

Abstract

We develop a model of the household where investments in public goods can be made at the cost of future earnings. If couples cannot commit ex ante to a sufficiently equal post-divorce allocation, specialization and public goods’ creation will be sub-optimal. However, investing in joint assets, which the marriage contract specifies are to be divided in the case of divorce, can reduce this problem by offering insurance to the lower earning partner.

Our model demonstrates that access to this “collateralized” version of the contract will lead to more household specialization, more public goods, and a higher value of marriage. Empirically, we show that quasi-exogenous variation in access to collateralization leads to more specialization, and that wealth has become a more important determinant of marriage in response to policies that have made marriage and cohabitation more similar. Wealthy individuals can thus access a more advantageous marriage contract, which has important policy implications.