Moral hazard in marriage: the use of domestic labor as an incentive device

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Walther, Selma (2017) Moral hazard in marriage: the use of domestic labor as an incentive device. Review of Economics of the Household, 15 (2). pp. 357-382. ISSN 1569-5239

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Abstract

This paper argues that some women in developing countries use domestic labor as a tool to incentivize husbands. A theoretical model is derived based on the traditions of rural Malawi, where men often supplement farm income with wage labor. As wage labor is not observed by the wife, this creates moral hazard: husbands may not make enough effort to bring home wages. The model predicts that women overcome this by using domestic labor as an incentive device: they increase their domestic labor and reduce their leisure in response to good consumption outcomes, but only if they cannot rely on divorce threat as an alternative source of incentives. This prediction is confirmed using survey data from Malawi. Identification is based on the fact that Malawi's kinship traditions exogenously determine women's accessibility to divorce. Where divorce is not an option, women make inefficient labor choices in order to provide incentives.

Item Type: Article
Keywords: Moral hazard, Divorce, Domestic labour, Matrilineal
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
H Social Sciences > HC Economic history and conditions
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Depositing User: Selma Walther
Date Deposited: 04 Sep 2018 08:33
Last Modified: 04 Sep 2018 08:33
URI: http://srodev.sussex.ac.uk/id/eprint/78481

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