Abstract
This paper develops a model of marriage as an institution that changes the incentives of a mating game between men and women. Unlike other models of the family, decisions to invest in children are not contractible ex-ante, but must be sub-game perfect given that intimacy and pregnancy are sequential. Marriage and divorce, which are publicly observable, create costs for exiting a match; informal relationships do not. Providing an institution which makes a match observable--marriage--improves incentives for men to invest costly unobservable effort in their children. The model accounts for several stylized facts about marriage, including better outcomes, on average, for children within marriage, and women's preferences for marriage over informal relationships. It also suggests why societies may impose costs for divorce and out-of-wedlock child bearing; the penalties can increase the average welfare of children. The model highlights the tensions surrounding these policies. Exogenous penalties are not Pareto-improving, even among the young; some children are strictly worse off with higher penalties even if the aggregate welfare of children increases.
Published Version
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