"Efficiency in Marriage"
BY: SHELLY J. LUNDBERG
University of Washington
Department of Economics
ROBERT A. POLLAK
Washington University, St. Louis
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=294081
Paper ID: NBER Working Paper No. W8642
Date: December 2001
Contact: SHELLY J. LUNDBERG
Email: Mailto:lundberg at u.washington.edu
Postal: University of Washington
Department of Economics
Savery Hall
Box 353330
Seattle, WA 98195-3330 USA
Phone: 206-543-6149
Fax: 206-685-7477
Co-Auth: ROBERT A. POLLAK
Email: Mailto:pollak at olin.wustl.edu
Postal: Washington University, St. Louis
Department of Economics, Campus Box 1208
205 Eliot Hall
One Brookings Drive
St. Louis, MO 63130 USA
ABSTRACT:
Economists usually assume that bargaining in marriage leads to
efficient outcomes. The most convincing rationale for this
assumption is the belief that efficient allocations are likely
to emerge from repeated interactions in stationary environments,
and that marriage provides such an environment. This paper
argues that when a current decision affects future bargaining
power, inefficient outcomes are plausible. If the spouses could
make binding commitments - in effect, commitments to refrain
from exploiting the future bargaining advantage - then the
inefficiency would disappear. But spouses seldom can make
binding commitments regarding allocation within marriage. To
investigate the efficiency of bargaining within marriage when
choices affect future bargaining power, we consider the location
decisions of two-earner couples. These location decisions are
transparent and analytically tractable examples of choices
likely to affect future bargaining power, but the logic of our
analysis applies to many other decisions. For example, decisions
about education, fertility, and labor force participation are
also potential sources of inefficiency.