Jul 26, 2012

When government subsidizes marriages . . .

The government of Austria started subsidizing marriages in 1984 and then it announced the suspension around 1988. Many more people got married before the suspension was effective. If you ask why the government would want to do this, I have the same question (although apparently there is a large literature on the subject). In any case in a new paper, the authors write (Frimmel, Halla, Winter-Ebmer, July 2012):
We exploit a unique policy episode in Austria, where a suspension of a relatively large marriage subsidy was announced, and the number of marriages was rapidly increasing by 350 percent just before this suspension. This allows us to identify couples who married just because of the suspension. We examine the selectivity of these marginal marriages couples who would have not married in the counterfactual situation without the suspension within a difference-in-differences framework along the outcome dimensions of marital stability, fertility behavior, and marital offspring's health. In particular, the estimation of compositional effects of the treated population due to the announcement of the suspension allows us to quantify the degree of selectivity. Contrary to expectations, we found that those who married just because of the subsidy are not much different from the crowd of regular marriages: their unions are practically as stable as an average marriages, but they have somewhat fewer children and have them later in their marriage. Moreover, the children born into these marriages are also similar in terms of health at birth.
Note the long term trends in the graph - the two rates were getting closer to each other (imagine a society where the marriage rate is equal to the divorce rate). The graph was taken from the paper. 

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