DP8529 Marriage as a Rat Race: Noisy Pre-Marital Investments with Assortative Matching

Author(s): Venkataraman Bhaskar, Ed Hopkins
Publication Date: August 2011
Keyword(s): assortative matching tournament, ex ante investments, gender differences, marriage, sex ratio.
JEL(s): C72, C78, D62, H31, J12
Programme Areas: Labour Economics, Development Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8529

We study the incentives of parents to invest in their children when these investments improve their marriage prospects, in a frictionless marriage market with non-transferable utility. Stochastic returns to investment eliminate the multiplicity of equilibria that plagues models with deterministic returns, and ensure that a unique equilibrium often exists. Equilibrium investment is efficient when there is complete symmetry between the sexes. However, when there is any asymmetry between the sexes, including an unbalanced sex ratio, investments are generically excessively relative to Pareto-efficiency. Our model can be used for examine several implications of gender differences. For example, if shocks are more variable for boys than for girls, girls will invest more than boys. If there is an excess of boys, then there is parental over-investment in boys and under-investment in girls, and total investment will be excessive.