Abstract
This paper applies the theory of relational contracts to a model in which a couple decides upon fertility and subsequently on continuation of the relationship. We formalize the idea that within-household-cooperation can be supported by self-interest. Since the costs of raising children-a household public good-are unequally distributed between partners, a conflict between individually optimal and efficient decisions exists. Side-payments can support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires stable relationships and credible punishment threats. Within this framework, we analyze the effects of separation costs and post-separation alimony payments on couples' fertility decisions. We derive the predictions that higher separation costs and higher alimony payments facilitate cooperation and hence increase fertility. We present empirical evidence based on a recent German reform that reduced rights to post-divorce alimony payments. We find that this reform reduced in-wedlock fertility.
| Item Type: | Journal article |
|---|---|
| Faculties: | Economics |
| Subjects: | 300 Social sciences > 330 Economics |
| ISSN: | 0933-1433 |
| Language: | English |
| Item ID: | 43526 |
| Date Deposited: | 27. Apr 2018 08:04 |
| Last Modified: | 04. Nov 2020 13:18 |
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