We examine how mehr, a conditional payment from husbands to wives in the event of
divorce, and dowry, a transfer from bride families to grooms at the time of marriage,
have evolved through natural shocks. We develop a model of marriage market in which
dowry acts as a groom price, whereas mehr serves to deter inefficient divorces. Our
comparative statics results show that the value of mehr is increasing (decreasing) in shocks
that raise (lower) income while the effect of such shocks on dowry is ambiguous; even
if dowry increases (decreases), the magnitude will be smaller than the corresponding
increase (decrease) in mehr. We then exploit several natural experiments in Bangladesh,
that include the Green Revolution around the 1960s, the Independence War in 1971 and
the famine of 1974, to explain fluctuations in the value of mehr and dowry observed in
Muslim marriages. Using two household survey datasets in Bangladesh, we find support
for our theoretical predictions. To rule out alternative explanations, in particular the effect
of legal changes, we exploit another natural experiment from the Indian state of West
Bengal that experienced the same natural shocks, but not any of the legal shocks affecting
Bangladesh. These results demonstrate that natural shocks may influence the evolution of
social institutions.