The effects of health shocks on family status: do financial incentives encourage marriage?

Andree Ehlert

doi:10.1007/s10198-021-01319-8

Abstract

This paper asks whether marriage decisions of unmarried mature couples are driven by the prospect of financial advantages for the later widowed after one partner has suffered a serious health shock. We hypothesize that, in contrast to traditional marriage models, such health shocks may induce unmarried couples to obtain economic benefits, such as survivors’ pensions in particular, through marriage in advance of one partner’s death. This question has not yet been studied empirically. Hazard models capturing unobserved effects are applied to longitudinal data of the German Socioeconomic Panel. It turns out that the probability of marriage after male partners’ health shocks can increase significantly depending on the amount of expected survivors’ pensions for the (likely) surviving female partners. In contrast, an increased probability of marriage after health shocks to women (depending on the expected financial benefits to men) was not found. These findings are supported by various robustness checks. Economic and political implications are discussed and the results are placed in an international context.

Highlights

In most Western countries and Western society, married couples enjoy financial privileges such as splitting tariffs, inheritance tax exemptions, health care benefits, and survivors’ pensions in contrast to the unmarried [21]
1 Note that the Socioeconomic Panel (SOEP) sample used in this study shows a comparable poverty rate for 2008 of 19% for 40–85-year-old unmarried women and 14% for widows of the same age group, according to the poverty threshold of 60% of the median of the equivalized income of the total population used in [15]
21 This is shown by a brief plausibility check of the correlations: Health shocks would certainly be positively correlated with poor relationship quality, and health shocks themselves would in turn be negatively correlated with the outcome marriage, which as a result tends to underestimate the effect of health shocks on marriage were carried out in Appendix 7, showing that the results are generally robust to different definitions of health shocks

Summary

Introduction

In most Western countries and Western society, married couples (including registered partnerships) enjoy financial privileges such as splitting tariffs, inheritance tax exemptions, health care benefits, and (prospective) survivors’ pensions in contrast to the unmarried [21]. Marital status can have a strong influence on social security. This is evident with respect to old-age poverty. Within the group of elderly single people, previous marital status is an important factor associated with old-age poverty. Against this background, the paper asks whether unmarried (mature) couples in established relationships anticipate the economic benefits of marriage after health shocks which may indicate a decline in residual life expectancy. Couples have an incentive to marry soon after the health shock, since payment of a later survivor’s pension is linked to prior formal marriage. From the economic perspective of adverse selection, this corresponds to the question of whether couples under asymmetric information tend to collectivize the risk of survivorship, since the health shock cannot be reliably questioned as a trigger for marriage after fulfilling a waiting period.

Ehlert

Results and discussion

Discussion

21 This is shown by a brief plausibility check of the correlations

Conclusion