Working Paper: CEPR ID: DP6703
Authors: Kai A. Konrad; Kjell Erik Lommerud
Abstract: We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has a high income and is a perfect emotional match, but compromises must often be struck. A high-income earner may abstain from marrying a low-income earner even though they would be a perfect match emotionally, because he may dislike the implicit income redistribution implied by marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people from the same income groups largely meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage.
Keywords: assortative mating; divorce; emotional rents; incomplete contracts; love; marriage; optimal taxation
JEL Codes: D61; H21; J12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Redistributive taxation (H23) | marriage stability (J12) |
| Income matching institutions (I24) | need for redistributive taxation (H23) |
| Preference matching institutions (I23) | effectiveness of redistributive taxation (H23) |
| Divorce option (J12) | marriage stability (J12) |