| Abstract: | In premodern societies, the residence of a newly wedded coupleis often decided by custom. We formulate a theory of optimalpostmarital residence rules based on contracting problems createdby the nature of premarriage human capital investments. We arguethat a fixed postmarital residence rule may mitigate a holdupproblem by specifying marriage terms and limiting possibilitiesfor renegotiation; the trade-off is that the rule may prohibitbeneficial renegotiation of postmarital location. A point ofinterest of our approach is that the magnitude and directionof transfers accompanying marriage are endogenous. We applyour theoretical results to understanding cross-cultural postmaritalresidence patterns. We find some predictive ability in variablesrelated to outside options, control over the environment, andpotential degree of social control. |
