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Review of Economics of the Household

, Volume 3, Issue 4, pp 367–385 | Cite as

For Better or For Worse? State-Level Marital Formation and Risk Sharing

  • Ralph Chami
  • Gregory D. Hess
Article

Abstract

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.

Keywords

consumption insurance marriage 

JEL Classifications

J12 D1 E21 

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Copyright information

© Springer Science+Business Media, Inc. 2005

Authors and Affiliations

  1. 1.International Monetary Fund InstituteWashington, DCUSA

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