Abstract

This paper builds and tests a model of marriage as an incomplete contract that arises from asymmetric virginity premiums and examines whether this can lead to social inefficiencies. Contrary to the efficient households hypothesis, women cannot prevent being appropriated by men once they enter marriage if they command lower marriage market opportunities upon divorce. Because men cannot or do not commit to compensating women for their lower ex post marriage market opportunities, marriage is an incomplete contract. Men may seek to lower women’s ex ante “market wages” in order to induce entry into joint production. Inefficient or abusive marriages are less likely to separate. Equalizing virginity premiums may reduce domestic and non-domestic violence.

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