In pre-modern societies the residence of a newly-wedded couple is often decided by custom. We formulate a theory of optimal post-marital residence rules based on contracting problems created by the nature of pre-marriage human capital investments. We argue that a fixed post-marital residence rule may mitigate a hold-up problem by specifying marriage terms and limiting possibilities for renegotiation; the trade-off is that the rule may prohibit beneficial renegotiation of post-marital location.

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... point of interest of our approach is that the magnitude and direction of transfers accompanying marriage are endogenous. We apply our theoretical results to understanding crosscultural post-marital residence patters. We find some predictive ability in variables related to outside options, control over the environment, and potential degree of social control. JEL Codes: J12, J41