Miguel Olivo Villabrille

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Jan Kabátek

j.kabatek@unimelb.edu.au

Title: Assortative Marriages and Household Income Inequality

Abstract: Income differences across households are larger the more similar are the earnings potentials of breadwinners within the household. As such, the tendency for individuals to marry people similar to them has likely served to amplify inequality across households. In this paper I study the effect that educational assortative matching has on income inequality in the United States. Quantifying this effect presents a serious empirical challenge because education and marriage patterns are jointly determined equilibrium outcomes. Observed patterns of marriage are an outcome of a two-sided dynamic matching process. Individuals on both sides of the market take as given the distribution of available singles at each point in time. Anticipating this process, forward looking individuals make pre-marital investments in human capital to improve future prospects on the marriage and labor markets. As such, I develop a dynamic discrete choice model of endogenous educational attainment and subsequent marriage market matching. I estimate the parameters of the model using US Census data combined with information on marriage registrations. I use the estimated model to perform a series of counterfactual experiments that help quantify the role of female educational attainment and assortative matching on education in amplifying income inequality across households.

Presenter:  Miguel Olivo Villabrille, University of New South Wales

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