between families are hence viewed as the renunciation of ownership rights over assets in order to make investment commitments credible. We thus view marriage as joint production between two families with a transfer of control rights to the family with the highest incentives to invest. In our context, we postulate the commitment problem to be on the bride’s side, so that monetary transfers correspond to dowries. To this aspect, we add two extra features. First, the extent to which agents are time-inconsistent depends negatively on how closely related partners are. Between cousins, ex-ante commitments are more credible, arguably because informal contracts are easier to enforce within the extended family. Conversely, when spouses are further apart, the role of the dowry is crucial as it becomes easier to renege on a contract. Thus, close-kin marriages require smaller dowry payments. Second, dowries are costly, as they imply borrowing on the credit market in order to make payments at the time of marriage. Our model then predicts that consanguinity and dowries are substitutes as instruments to overcome or to mitigate the aforementioned timeinconsistency problem. The relative use of these two devices will depend on the associated costs. When marrying close kin, families forgo the bene fi ts of gene diversi fi cation, risk hedging, or social network integration. On the other hand, costly dowry transfers are lost, hence not invested.

We test our predictions using data on 4,364 households from the 1996 Matlab Health and Socioeconomic Survey, conducted in 141 villages in Bangladesh. We fi nd that women in consanguineous unions are, on average, 6-7 percent less likely to bring a dowry at marriage, after controlling for other attributes at the time of marriage, suggesting that consanguinity and dowry are substitutes. Looking at the effects of credit constraints on the prevalence of consanguineous marriages, we observe a negative relationship between cousin marriage and parental socio-economic status. An alternative test consists of examining the relationship between consanguinity and the age at marriage. Admittedly, if women and men are married at earlier ages, their respective families have then less time to accumulate assets, exposing themselves to more stringent credit constraints. Our results lend support to this argument. We fi nd that a one-year higher age at marriage increases the value of a dowry by nearly 50 percent, while decreasing the likelihood of consanguineous marriage by approximately 3 percent.

In depicting a negative correlation between consanguinity and the payment of a dowry at the time of marriage, our fi ndings are entirely consistent with existing sociological and demographic studies conducted on this issue (Centerwall and Centerwall 1966; Reddy 1993). Furthermore, our paper adheres to the economics literature on marriage markets in developing countries. It shares with Peters and Siow (2002) the property that an increase in spousal investment commitment increases the quality of the match. However, our analysis does not focus on pre-marital investments but on the time-inconsistency problem associated with the inability to pre-commit to a given course of action. Bloch and Rao (2002) and Jacoby and Mansuri (2006) models are, in that respect, germane to ours. In Bloch and Rao (2002), husbands cannot commit to reveal their true satisfaction once married, so that violence becomes a credible signal of dissatisfaction, a trigger of compensation on the part of the bride’s family. Jacoby and Mansuri (2006) argue that the custom of watta-satta in rural Pakistan addresses yet another contracting problem: by marrying each other’s sister, two husbands expose themselves to retaliation on their sisters, in the event of domestic abuse on their part. This then constitutes a credible commitment to non-violence. Closer to our approach as it deals with wealth and investment rather than domestic violence, Botticini and Siow (2003) explicitly take the view that dowries address an inter-generational time-inconsistency problem: before marriage, daughters cannot commit to manage parental assets as efficiently as their male siblings once they get married, inducing altruistic parents to provide dowries for their daughters, while leaving bequests to sons. We instead model an inter-familial principal-agent problem, in which grooms’ families are principals 3