Macro International, 1995, Bittles, et al., 1993). The rates of consanguineous marriage are as high as 52 percent in Tamil Nadu and 37 percent in Andhra Pradesh and Karnataka.<sup>8</sup> The practice also seems to vary by religion. In India, 23.3 percent of all Muslim marriages are consanguineous, compared to 10.6 percent of all Hindu marriages, 10.3 percent of all Christian marriages, and 17.1 percent of all Buddhist marriages (Bittles, 2003).<sup>9</sup>

# 3 The Economics of Consanguinity

In this section, we propose a model of a marriage market in which couples form, sign a marriage contract, and undertake investments after marriage. Two key assumptions lie at the starting point of our model. The fi rst is that dowries exist and in fl uence marriage outcomes. The second key assumption concerns the role of social distance between the families of the bride and the groom. On the one hand, we assume that ceteris paribus, social distance enhances the outcomes of marriage: families can diversify genes, hedge risks, smooth consumption or simply integrate their social networks (Rosensweig and Stark, 1989; La Ferrara, 2003). On the other hand, shorter social distance makes ex-ante contracting between families easier. Close relatives have more (veri fi able) information about each other or can draw on more effective enforcement mechanisms. We now proceed to a formal description of the forces at play.

## 3.1 The Model

Consider a continuum of potential spouses. Grooms and brides are assimilated to their families and are labeled i ∈ I, and j ∈ J respectively. Spouse k ∈{i, j} comes from a family endowed with wealth wk. A pair (i, j) is characterized by social distance dij ∈ [0, 1]. We assume that brides and grooms’s families are in equal number and have identical wealth distribution. The support of the wealth distribution is the interval [wmin, wmax]. For each individual with wealth w, there exists a potential match who is at distance d, for all d ∈ [0, 1]. Individuals and their families can be thought of as being homogeneously distributed over a cylinder, such that the vertical axis represents individuals’ wealth w, and the angle between two individuals measures their distance (normalized by 2π), as depicted on Figure 1.

The timing of the economy is as follows:

- T = 0 : Families choose a partner for their offspring by fi rst designating a desired match. Couples (i, j) form when two families have elected each other. A marriage contract is then signed between the respective families. A marriage contract consists of immediate transfers (Di, Dj) from i to j and j to i respectively to be completed at signature of the contract, and a transfer commitment (zi, zj) to be made in the following period.

- T = 1 : Families invest (Ki, Kj) in the “marital production function”, output is realized and consumption takes place.

> <u>8</u> The exception though is Kerala, where a predominantally Christian population do not practice consanguineous marriage.

> 9 There are, however, strong regional differences between religions, for example in southern India, consanguinity is more common among Hindus whereas in the western and northern areas, consanguinity is more common among Muslims (Banerjee and Roy 2002, Bittles 2003).

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