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Efficiency in Marriage

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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. Initial 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.

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Authors and Affiliations

  1. Department of Economics, University of Washington, Box 353330, Savery Hall, Seattle, WA, 98195, USA

    Shelly Lundberg

  2. Department of Economics, Washington University in St. Louis, Campus Box 1208, 205 Eliot Hall, One Brookings Drive, St. Louis, MO, 63130, USA

    Robert A. Pollak

Authors
  1. Shelly Lundberg
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  2. Robert A. Pollak
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Correspondence to Shelly Lundberg.

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Lundberg, S., Pollak, R.A. Efficiency in Marriage. Review of Economics of the Household 1, 153–167 (2003). https://doi.org/10.1023/A:1025041316091

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  • DOI: https://doi.org/10.1023/A:1025041316091

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