The tax regimes applied to couples in many countries including the US, France, and Germany imply either a marriage penalty or a marriage bonus. We study how they affect the decision to get married by considering two potential spouses who play a marriage proposal game. At the end of the game they may get married, live together without formal marriage, or split up. Proposing (or getting married) implies a cost that can indicate strong love. The striking property we obtain is that a marriage bonus may actually reduce the probability that a couple gets married. If the bonus is sufficiently large, signaling is no longer informative, and a pooling equilibrium in which no couples get married remains. Similarly, a marriage penalty may increase marriages. The penalty may lead to a separating equilibrium with efficiency enhancing information transmission, which was otherwise not possible.

Barigozzi, F., Cremer, H., Roeder, K. (2019). Till taxes do us part: Tax penalties or bonuses and the marriage decision. EUROPEAN ECONOMIC REVIEW, 118, 37-50 [10.1016/j.euroecorev.2019.05.001].

Till taxes do us part: Tax penalties or bonuses and the marriage decision

Barigozzi, Francesca;
2019

Abstract

The tax regimes applied to couples in many countries including the US, France, and Germany imply either a marriage penalty or a marriage bonus. We study how they affect the decision to get married by considering two potential spouses who play a marriage proposal game. At the end of the game they may get married, live together without formal marriage, or split up. Proposing (or getting married) implies a cost that can indicate strong love. The striking property we obtain is that a marriage bonus may actually reduce the probability that a couple gets married. If the bonus is sufficiently large, signaling is no longer informative, and a pooling equilibrium in which no couples get married remains. Similarly, a marriage penalty may increase marriages. The penalty may lead to a separating equilibrium with efficiency enhancing information transmission, which was otherwise not possible.
2019
Barigozzi, F., Cremer, H., Roeder, K. (2019). Till taxes do us part: Tax penalties or bonuses and the marriage decision. EUROPEAN ECONOMIC REVIEW, 118, 37-50 [10.1016/j.euroecorev.2019.05.001].
Barigozzi, Francesca; Cremer, Helmuth; Roeder, Kerstin
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/688072
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