Efficiency in Marriage

28 Pages Posted: 14 Dec 2001 Last revised: 12 Feb 2021

See all articles by Shelly J. Lundberg

Shelly J. Lundberg

University of California, Santa Barbara (UCSB); IZA Institute of Labor Economics; University of Bergen - Department of Economics

Robert A. Pollak

Washington University in St. Louis - John M. Olin Business School; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: December 2001

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.

Suggested Citation

Lundberg, Shelly J. and Pollak, Robert A., Efficiency in Marriage (December 2001). NBER Working Paper No. w8642, Available at SSRN: https://ssrn.com/abstract=294081

Shelly J. Lundberg (Contact Author)

University of California, Santa Barbara (UCSB) ( email )

Santa Barbara, CA 93106
United States

IZA Institute of Labor Economics

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University of Bergen - Department of Economics ( email )

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Norway

Robert A. Pollak

Washington University in St. Louis - John M. Olin Business School ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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