IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v51y2007i2p337-363.html
   My bibliography  Save this article

Should we write prenuptial contracts?

Author

Listed:
  • Rainer, Helmut

Abstract

A successful marriage requires for both parties to make investments in their relationship and marital assets. How such assets would be divided if and when the parties divorce is an important factor determining each party’s (exante) investment incentives. Using the “incomplete contracting” approach, we characterize the optimal asset division rule, one that provides the parties with the best investment incentives. We then discuss the circumstances under which the spouses would agree, in equilibrium, to write a prenuptial contract with this asset division rule. We conclude by exploring the implications of our results in the context of various asset division rules currently discussed by policy-makers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    • Handle: RePEc:eee:eecrev:v:51:y:2007:i:2:p:337-363
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014-2921(06)00023-7
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Giulio Fella & Paola Manzini & Marco Mariotti, 2004. "Does Divorce Law Matter?," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 607-633, June.
    3. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, January.
    4. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    5. Maija Halonen, 2002. "Reputation And The Allocation Of Ownership," Economic Journal, Royal Economic Society, vol. 112(481), pages 539-558, July.
    6. Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-454, June.
    7. Kathryn E. Spier, 1992. "Incomplete Contracts and Signalling," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 432-443, Autumn.
    8. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    9. David de Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 361-386.
    10. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    11. Kai A. Konrad & Kjell Erik Lommerud, 2000. "The bargaining family revisited," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(2), pages 471-487, May.
    12. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership of Public Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1343-1372.
    13. Rasul, Imran, 2008. "Household bargaining over fertility: Theory and evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 86(2), pages 215-241, June.
    14. Saku Aura, 2002. "Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining," CESifo Working Paper Series 801, CESifo.
    15. Gray, Jeffrey S, 1998. "Divorce-Law Changes, Household Bargaining, and Married Women's Labor Supply," American Economic Review, American Economic Association, vol. 88(3), pages 628-642, June.
    16. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
    17. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 39-84.
    18. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
    19. Clark, Simon, 1999. "Law, Property, and Marital Dissolution," Economic Journal, Royal Economic Society, vol. 109(454), pages 41-54, March.
    20. Lommerud, Kjell Erik, 1989. "Marital Division of Labor with Risk of Divorce: The Role of "Voice" Enforcement of Contracts," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 113-127, January.
    21. Ian Smith, 2003. "The Law and Economics of Marriage Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 201-226, April.
    22. Allen, Douglas W, 1992. ""What Does She See in Him?" The Effect of Sharing on the Choice of Spouse," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 57-67, January.
    23. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
    24. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
    25. Imran Rasul, 2006. "The Economics of Child Custody," Economica, London School of Economics and Political Science, vol. 73(289), pages 1-25, February.
    26. Weiss, Yoram & Willis, Robert J, 1985. "Children as Collective Goods and Divorce Settlements," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 268-292, July.
    27. Shelly Lundberg & Robert Pollak, 2003. "Efficiency in Marriage," Review of Economics of the Household, Springer, vol. 1(3), pages 153-167, September.
    28. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-349, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    2. Francesconi, Marco & Muthoo, Abhinay, 2003. "An Economic Model of Child Custody," IZA Discussion Papers 857, Institute of Labor Economics (IZA).
    3. John Douglas Skåtun, 2017. "Bargaining on your Spouse: Coasean and Non-Coasean Behaviour Within Marriage," Journal of Family and Economic Issues, Springer, vol. 38(2), pages 263-278, June.
    4. Helmut Rainer, 2008. "Gender discrimination and efficiency in marriage: the bargaining family under scrutiny," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(2), pages 305-329, April.
    5. Tümer Kapan, 2010. "Property Division Laws: The Effects on Labor Supply and Household Bargaining," 2010 Meeting Papers 1127, Society for Economic Dynamics.
    6. Schmitz, Patrick W., 2015. "Government versus private ownership of public goods: The role of bargaining frictions," Journal of Public Economics, Elsevier, vol. 132(C), pages 23-31.
    7. Smith, Ian, 2007. "Property division on divorce with inequity aversion," International Review of Law and Economics, Elsevier, vol. 27(2), pages 111-128.
    8. Kvaløy, Ola, 2008. "Do norms matter for firm boundaries?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 969-975, June.
    9. Muthoo, Abhinay & Francesconi, Marco, 2006. "Control Rights in Public-Private Partnerships," CEPR Discussion Papers 5733, C.E.P.R. Discussion Papers.
    10. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    11. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
    12. Marcassa Stefania, 2013. "Divorce laws and divorce rate in the US," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 997-1035, August.
    13. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    14. Christian A. Ruzzier, 2009. "Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered," Harvard Business School Working Papers 09-119, Harvard Business School.
    15. Dan Anderberg & Helmut Rainer & Kerstin Roeder, 2016. "Family-Specific Investments and Divorce: A Theory of Dynamically Inconsistent Household Behavior," CESifo Working Paper Series 5996, CESifo.
    16. Marco Francesconi & Helmut Rainer & Wilbert vanderKlaauw, 2009. "The Effects of In-Work Benefit Reform in Britain on Couples: Theory and Evidence," Economic Journal, Royal Economic Society, vol. 119(535), pages 66-100, February.
    17. Ian Smith, 2003. "The Law and Economics of Marriage Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 201-226, April.
    18. Tobias Regner & Maija Halonen-Akatwijuka, 2004. "Digital Technology And The Allocation Of Ownership In The Music Industry," Royal Economic Society Annual Conference 2004 54, Royal Economic Society.
    19. Schmitz, Patrick W. & Kusterer, David J., 2018. "Government versus Private Ownership of Public Goods: Experimental Evidence," CEPR Discussion Papers 13204, C.E.P.R. Discussion Papers.
    20. Müller, Daniel & Schmitz, Patrick W., 2016. "Transaction costs and the property rights approach to the theory of the firm," European Economic Review, Elsevier, vol. 87(C), pages 92-107.

    More about this item

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:51:y:2007:i:2:p:337-363. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.