Natural shocks and marriage markets: Fluctuations in mehr and dowry in Muslim marriages

We examine how mehr, a conditional payment from husbands to wives in the event of divorce, and dowry, a transfer from the bride's family to the groom at the time of marriage, have fluctuated in Bangladesh due to natural shocks. We develop a model of the marriage market in which dowry acts as a groom price, whereas mehr serves to deter inefficient divorces. Our comparative statics results show that mehr and dowry are both increasing (decreasing) in shocks that raise (lower) income. We then exploit several natural experiments in Bangladesh including the Green Revolution in the 1960s, war of independence in 1971, and famine of 1974 to explain fluctuations in the value of mehr and dowry observed in Muslim marriages. Using two household survey datasets, we find partial support for our theoretical predictions. To rule out alternative explanations, particularly the effect of legal changes, we use household survey data from the Indian state of West Bengal that experienced a similar increase in agricultural productivity but none of the legal changes affecting Bangladesh. These results demonstrate that natural shocks may affect social institutions.