Citation

Discussion Paper Details

Please find the details for DP6703 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Love and Taxes - and Matching Institutions

Author(s): Kai A. Konrad and Kjell Erik Lommerud

Publication Date: February 2008

Keyword(s): assortative mating, divorce, emotional rents, incomplete contracts, love, marriage and optimal taxation

Programme Area(s): Public Economics

Abstract: We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has a high income and is a perfect emotional match, but compromises must often be struck. A high-income earner may abstain from marrying a low-income earner even though they would be a perfect match emotionally, because he may dislike the implicit income redistribution implied by marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people from the same income groups largely meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6703

Bibliographic Reference

Konrad, K and Lommerud, K. 2008. 'Love and Taxes - and Matching Institutions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6703