Couples Do Better With Economic Burdens of Health

A new paper by Canadian economists suggests marital status plays an important role in how individuals economically manage disability and illness.

Researchers found that in marriages, “main-earners” (typically husbands) tend to transfer income and compensate “second-earners” (typically wives).

The second-earners, in turn, provide conditional time and care in periods of need (such as illness and disability of main-earner).

The insurance the second-earner provides to the main-earner in the marital contract serves as an important mechanism to help smooth out household income in periods of health and disability shocks to the main-earner; and as a way to support the future earning potential of the main-earner.

The researchers also find that the relative value of marriage changes in different ways for men and women as they age.

Men who receive bad shocks early in life may lose the insurance offered by marriage by being sorted out of possible matches in the early stages, according to the study.

Marriages become more stable the longer the couple is together, and uncertainty is resolved. The long-term costs associated to health shocks are particularly high for main-earners in the early stages of their working life, because they imply a permanent loss of human capital and earning potential.

Other findings include:

• “Low-risk” marriages, where the main-earner is in a low-risk health state, are more stable and encounter less renegotiation and termination of marital contracts at every stage of the life-cycle.
• Men who are at high risk of receiving health and disability shocks value marriage early in life, when they are poor in both assets and work experience. As these husbands age, their gains from marriage decrease as “buffer stocks” of human capital and assets are accumulated and they become more likely to trigger a renegotiation of the marital contract. These later renegotiations are referred to by the authors as a “midlife crisis.”
• All men value marriage at the late stages of their working life as they approach retirement, and the end of their main-earner status, as well as during periods of high health risk.

Source: University of British Columbia