For Better or For Worse? State-Level Marital Formation and Risk Sharing
Why do some U.S. states have higher levels of marital formation than others? This paper introduces an economic model wherein a state’s representative individual may choose to marry in order to diversify his or her idiosyncratic income risk. The paper demonstrates that such a diversification motive is enhanced for some utility functions when a state’s level of undiversifiable risk becomes larger, and when a state’s initial income is lower. A test of the model’s predictions, using cross-sectional data for the 50 U.S. states, provides some suggestive evidence for a risk sharing motive in marriage formation and joint spouse labor participation.
© 2005 Springer-Verlag
Chami, Ralph and Gregory Hess. "For Better or For Worse? State-Level Marital Formation and Risk Sharing." Review of Economics of the Household 3.4 (2005): 367-385. DOI: 10.1007/s11150-005-4940-2