Muslim family law, prenuptial agreements and the emergence of dowry in Bangladesh∗

Existing theoretical and empirical research on dowries has difficulty accounting for the large changes in dowry levels observed in many countries over the past few decades. To explain trends in dowry levels in Bangladesh, we draw attention to an institutional feature of marriage contracts previously ignored in the literature: the mehr or traditional Islamic brideprice, which functions as a prenuptial agreement in Bangladesh due to the default practice of being only payable upon divorce. We develop a model of marriage contracts in which mehr serves as a barrier to husbands exiting marriage and a component of dowry is an amount that ex ante compensates the groom for the cost of mehr. The contracts are welfare-improving because they induce husbands to internalize the social costs of divorce for women. We investigate how mehr and dowry respond to exogenous changes in the costs of polygamy and divorce, and show that our model gives a different set of predictions than traditional models of dowry payments without contractible mehr. To test the model’s predictions empirically, we use data collected on marriage contracts between 1956 and 2004 from a large household survey from the Northwest region of the country, and make use of key changes in Muslim Family Law in 1961 and 1974. We show that major changes in dowry levels took place precisely after the legal changes, corresponding to simultaneous changes in levels of mehr. ∗We are grateful to the Institute for Advanced Study, Harvard’s South Asia Initiative, and to the Islamic Legal Studies Program at Harvard Law School for financial support, and to Faculty and 2006-2007 Members at the IAS School of Social Science for very helpful comments. We also thank Robert Barro, Effi Benmelech, Georgy Egorov, Ezra Friedman, Drew Fudenberg, Oliver Hart, Rachel Kranton, Sendhil Mullainathan, Nathan Nunn, Nicola Persico and Matthias Schundeln for valuable feedback, seminar participants at Harvard University, Yale University, Duke University, University of Edinburgh, University of Essex, NYU, and BREAD for comments, and Eduardo Nakasone for research assistance.