The Economics of the Marriage Contract: Theories and Evidence

In this paper we ask, what is the role of the marriage contract? We first formalize three prominent hypotheses on why people marry. These are based on marriage providing an exogenous payoff to married partners; marriage as a commitment device; and marriage as a signaling device. The comparative static we focus on is how a fall in divorce costs affects the divorce hazard. Each theory highlights that divorce costs affect the divorce hazard both through an effect on married couples directly; and through an effect on the composition of couples that decide to marry -- a selection effect. We then bring these alternative views of the marriage contract to bear on the data using individual marriage and divorce certificate data. Such disaggregated information allows us to identify both the direct and selection effects. The results emphasize the importance of viewing marriage as a commitment device for explaining behavior in the American marriage market.