Economic Incentives and Family Formation

Ohio State University Research Foundation -Do Not Use, Columbus OH

Investigators

Abstract

If marriage incentives are to be used as policy tools for improving the welfare of American families, it is necessary to gain a better understanding of how individuals choose their marital status. From elimination of the "marriage tax" to covenant marriage laws to gay marriage and domestic partner benefits, policy initiatives that address the link between marriage and well-being require a solid understanding of the forces that drive union-forming decisions. However, we do not yet know the extent to which these decisions are affected by income taxes and other economic factors that can be altered by policy, and the extent to which they are determined by family background, attitudes, and other factors that are less readily manipulated. This research will provide new evidence on the determinants of family formation, with an emphasis on economic gains and losses conferred by law on married couples. Upon marrying, individuals often see changes in their income tax burdens and welfare benefits, gain health insurance through their spouse's employer, and become bound by state divorce law. The study will determine whether such gains and losses are important determinants of the decision to marry rather than cohabit or remain single. To identify these effects, transitions between marital states will be tracked for respondents in the 1979 National Longitudinal Survey of Youth. Data will be collected on the parameters of each state's income tax laws, divorce and property rights laws, welfare programs, etc.; these data will be used to assign each individual or couple the "expected" financial value associated with each marital status. Regression analysis will be the main methodology for this research. By considering not only these legally mandated factors but also race, schooling, family background, children, and environmental characteristics, the analysis will determine how each factor affects transitions between marital states.