Marriage and consumption insurance [microform] : what's love got to do with it? / Gregory D. Hess.
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 h...
Saved in:
| Online Access: |
Connect to online resource |
|---|---|
| Main Author: | |
| Corporate Author: | |
| Other title: | What's love got to do with it? |
| Format: | Microfilm Book |
| Language: | English |
| Published: |
Cleveland, Ohio :
Federal Reserve Bank of Cleveland,
[2001]
|
| Series: | Working paper (Federal Reserve Bank of Cleveland) ;
0104. ASI microfiche library. Non-depository collection ; ASI 2001 9377-9.302. |
| Subjects: |
| Summary: | 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. The presence of love, however, complicates the picture. If love is very persistent, for example, and the resolution of uncertainty to agents' income is early, then those who in fact married hedges 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 fleeting 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. |
|---|---|
| Item Description: | "May 2001." |
| Physical Description: | 43 pages ; 28 cm. Also available via the Internet from the Federal Reserve Bank of Cleveland home page. |
| Bibliography: | Includes bibliographical references (pages 37-38) |
| Reproduction Note: | Microfiche. |
| Additional Physical Form available Note: | Also available via the Internet from the Federal Reserve Bank of Cleveland home page. |
| Citation/References Note: | Lexis/Nexis statistical; American statistical index. Abstracts. |