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Marriage, Divorce and Reservation Wages

Author

Listed:
  • Roberto Bonilla
  • Francis Kiraly
  • Miguel Ángel Malo
  • Fernando Pinto Hernández

Abstract

We present an equilibrium model of inter-linked frictional labour and marriage markets. In the marital market, men and women are involved in random sequential search for a partner. Men are seen as breadwinners in the family, and therefore in the labour market unemployed men carry out a constrained sequential search for jobs. We establish that when divorce (initiated by women) is an option, in an equilibrium with male marriage premium married men have a higher reservation wage than single men. This result holds with both exogenous and endogenous wage distributions, where the latter scenario implies firms discriminate by marital status. Ironically, at birth men are better off because divorce is possible: the wage posting mechanism allows them to extract the utility loss from a potential future divorce in the form of higher reservation wages, and thus better wage offer distributions. We successfully test our results using German data.

Suggested Citation

  • Roberto Bonilla & Francis Kiraly & Miguel Ángel Malo & Fernando Pinto Hernández, 2024. "Marriage, Divorce and Reservation Wages," CESifo Working Paper Series 11123, CESifo.
    • Handle: RePEc:ces:ceswps:_11123
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    References listed on IDEAS

    as
    1. Goussé, Marion & Jacquemet, Nicolas & Robin, Jean-Marc, 2017. "Household labour supply and the marriage market in the UK, 1991-2008," Labour Economics, Elsevier, vol. 46(C), pages 131-149.
    2. John Addison & Mário Centeno & Pedro Portugal, 2009. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," Journal of Labor Research, Springer, vol. 30(1), pages 1-8, March.
    3. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    4. Roberto Bonilla & Francis Kiraly & John Wildman, 2019. "Beauty Premium And Marriage Premium In Search Equilibrium: Theory And Empirical Test," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 851-877, May.
    5. Gould, Eric D. & Paserman, M. Daniele, 2003. "Waiting for Mr. Right: rising inequality and declining marriage rates," Journal of Urban Economics, Elsevier, vol. 53(2), pages 257-281, March.
    6. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529, July.
    7. Alan B. Krueger & Andreas I. Mueller, 2016. "A Contribution to the Empirics of Reservation Wages," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 142-179, February.
    8. repec:hal:spmain:info:hdl:2441/660vg58v5k8erajtn9uj2uue81 is not listed on IDEAS
    9. Bonilla, Roberto & Malo, Miguel Á. & Pinto, Fernando, 2022. "Marriage wage premium with contract type heterogeneity," Labour Economics, Elsevier, vol. 78(C).
    10. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, vol. 24(C), pages 107-115.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    frictional labour markets; frictional marriage markets; reservation wages;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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