an economist's view of marriage

[Doug Henwood]

[it's so hard to tell if these are intended as parodies...]

"Marriage and Consumption Insurance: What's Love Got to Do With
  It?"

       BY:  GREGORY D. HESS
               Oberlin College
               CESifo (Center for Economic Studies and Ifo
               Institute for Economic Research)

Document:  Available from the SSRN Electronic Paper Collection:
            http://papers.ssrn.com/paper.taf?abstract_id=277284

            Other Electronic Document Delivery:
            http://www.CESifo.de
            SSRN only offers technical support for papers
            downloaded from the SSRN Electronic Paper Collection
            location. When URLs wrap, you must copy and paste
            them into your browser eliminating all spaces.

Paper ID:  CESifo Working Paper Series No. 507
     Date:  June 2001

  Contact:  GREGORY D. HESS
    Email:  Mailto:gregory.hess at oberlin.edu
   Postal:  Oberlin College
            Oberlin, OH 44074  USA

Paper Requests:
  Hardcopies For Libraries: contact Gertraud Porak, Postal: CESifo
  Inc., Poschinger Str. 5, 81679 Munich, Germany.
  Mailto:porak at CESifo.de http://www.CESifo.de

ABSTRACT:
  This paper explores the role of marriage when markets are
  incomplete so that individuals cannot diversify their
  idiosyncratic labor income risk. Ceteris paribus, an individual
  would prefer to marry a "hedge" (i.e., a spouse whose income is
  negatively correlated with her own) as it raises her expected
  utility. However, the existence of love complicates the picture:
  while marrying a hedge is important, an individual may not do so
  if she finds someone with whom she shares a great deal of love.
  Is love more important to a lasting marriage than economic
  compatibility? To answer this question, I develop a simple model
  where rational individuals meet, enjoy the economic and
  non-pecuniary benefits of marriage (i.e., love), and then must
  decide whether to remain married or divorce.

  The model predicts that if love is persistent and the
  resolution of uncertainty to agents' income is early, then those
  who in fact married hedges (and for good reason) are the ones
  most likely to be caught short with too little love in order to
  save a marriage in the event of an adverse shock. Consequently,
  under these conditions individuals who are good hedges for one
  another are more likely to marry one another, although once
  married, they will be more likely to divorce. In contrast, if
  love is temporary (in the sense of reverting to a common mean)
  and the resolution of uncertainty to agents' income is
  predominantly later, then those who in fact marry hedges will in
  fact be less likely to subsequently divorce. Evidence is
  provided to distinguish which of these alternative scenarios is
  in support of these aspects of the decision to stay married.
  Additional hypotheses regarding the effect of differences in the
  expected means and volatilities of partners' incomes are also
  derived from the theory and tested.

  Keywords: Consumption Insurance, Marriage