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Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality

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Author Info
Fernández, Raquel
Guner, Nezih
Knowles, John

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Abstract

This Paper examines the interactions between household matching, inequality, and per capita income. We develop a model in which agents decide whether to become skilled or unskilled, form households, consume and have children. We show that the equilibrium sorting of spouses by skill type (their correlation in education) is increasing as a function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting, wage inequality, per capita income and fertility differentials are positively correlated across steady states. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses’ education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3040.

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Date of creation: Nov 2001
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Handle: RePEc:cpr:ceprdp:3040

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Related research
Keywords: assortative matching education fertility growth human capital

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  13. Michael Kremer & Daniel Chen, 1999. "Income-Distribution Dynamics with Endogenous Fertility," American Economic Review, American Economic Association, vol. 89(2), pages 155-160, May. [Downloadable!] (restricted)
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  20. Dahan, Momi & Gaviria, Alejandro, 2001. "Sibling Correlations and Intergenerational Mobility in Latin America," Economic Development and Cultural Change, University of Chicago Press, vol. 49(3), pages 537-54, April.
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  22. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December. [Downloadable!] (restricted)
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  24. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
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