Betting the House: How Assets Influence Marriage Selection, Marital Stability, and Child Investments

There has been a tremendous erosion of marriage over the last 50 years, in particular among the young, poor, and non-white. Why has marriage seemingly lost value for some groups, while retaining it for others?  This paper... [ view full abstract ]

There has been a tremendous erosion of marriage over the last 50 years, in particular among the young, poor, and non-white. Why has marriage seemingly lost value for some groups, while retaining it for others?  This paper proposes while cohabitation and marriage have become more and more similar, assets are still very differently handled in marriage than in alternative arrangements. We provide a model where those with more assets can purchase a marital home, which will be divided in the case of divorce: this reduces divorce incentives for the higher-earning partner and provides insurance value to partners who reduce their own earning potential in order to invest in children, increasing their investment, making marriage more attractive. The model predicts that as policy changes have decreased the commitment-value of marriage, low asset individuals will marry less, while high asset individuals will be less affected and we show that these predictions hold empirically using data from the PSID and SIPP.  Using variation in the Housing Price Index, we show that couples with easier access to homes indeed divorce less and invest more in children, with greater specialization between husband and wife.