For better or for worse? : State-level marital formation and risk sharing

Why do some U.S. states have higher levels of marital formation than others? This paper introduces an economic model wherein a state's representative individual may choose to marry in order to diversity 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 predictious, 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 attitude towards risk. - Consumption Insurance ; Marriage