For Better or For Worse? State-Level Marital Formation and Risk Sharing
CESifo, Munich, 2002
CESifo Working Paper No. 702
![](https://cesifo.org/DocImg/702.jpg?c=1689236988)
Why do some U.S. states have higher levels of marital formation than others? This paper introduces an economic model wherin a state’s representative individual may choose to marry in order to diversify his or her idiosyncratic income risk. The paper demonstrates that such a diversification motive is enhanced for some utility functions when a state’s level of undiversifiable risk becomes larger, and when a state’s initial income and growth rate is lower. A test of the model’s predictions, using cross-sectional data for the 50 U.S. states, suggests that there is broad support for a risk sharing motive for marriage as well as for a precautionary savings motive.