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Marital Sorting, Inequality and the Role of Female Labor Supply: Evidence from East and West Germany

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  • Nico Pestel

Abstract

This paper examines to what extent marital sorting affects cross-sectional earnings inequality in Germany over the past three decades, while explicitly taking into account labor supply choices. Using rich micro data, the observed distribution of couples' earnings is compared to a counterfactual of randomly matched spouses. Hypothetical earnings are predicted based on a structural model of household labor supply. For West Germany, a positive effect of marital sorting on inequality is found after adjusting for labor supply behavior, while the effect is limited when earnings are taken as given. This means that there is positive sorting in earnings potential which is veiled by relatively low female labor force participation. In East Germany, the impact of marital sorting on inequality is highly disequalizing irrespective of adjusting for labor supply choices. This is mainly due to the fact that East German women are much more attached to the labor market.

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  • Nico Pestel, 2015. "Marital Sorting, Inequality and the Role of Female Labor Supply: Evidence from East and West Germany," SOEPpapers on Multidisciplinary Panel Data Research 786, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp786
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    Cited by:

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    2. Carlo V. FIORIO & Stefano VERZILLO, 2018. "Looking in Your Partner’s Pocket Before Saying “Yes!" Income Assortative Mating and Inequality," Departmental Working Papers 2018-02, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    3. Pestel, Nico, 2017. "Searching on Campus? Marriage Market Effects of the Student Gender Composition," IZA Discussion Papers 11175, Institute of Labor Economics (IZA).
    4. Omoniyi Alimi & David C Maré & Jacques Poot, 2018. "Who partners up? Educational assortative matching and the distribution of income in New Zealand," Working Papers 18_13, Motu Economic and Public Policy Research.
    5. Bernt Bratsberg & Simen Markussen & Oddbjørn Raaum & Knut Røed & Ole Røgeberg, 2023. "Trends in Assortative Mating and Offspring Outcomes," The Economic Journal, Royal Economic Society, vol. 133(651), pages 928-950.
    6. Leo Azzollini & Richard Breen & Brian Nolan, 2023. "Demographic behaviour and earnings inequality across OECD countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 441-461, June.
    7. Charlotte Bartels & Carsten Schroeder, 2020. "The role of rental income, real estate and rents for inequality in Germany," Working Papers 7, Forum New Economy.
    8. Adrian Chadi, 2017. "There Is No Place like Work: Evidence on Health and Labor Market Behavior from Changing Weather Conditions," IAAEU Discussion Papers 201709, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    9. Bossler, Mario & Westermeier, Christian, 2020. "Measurement error in minimum wage evaluations using survey data," IAB-Discussion Paper 202011, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Pasteau, Etienne & Zhu, Junyi, 2018. "Love and money with inheritance: Marital sorting by labor income and inherited wealth in the modern partnership," Discussion Papers 23/2018, Deutsche Bundesbank.
    11. Nicolas Frémeaux & Arnaud Lefranc, 2020. "Assortative Mating and Earnings Inequality in France," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 757-783, December.
    12. Nico Pestel, 2021. "Searching on campus? The marriage market effects of changing student sex ratios," Review of Economics of the Household, Springer, vol. 19(4), pages 1175-1207, December.
    13. Omoniyi B. Alimi & David C. Maré & Jacques Poot, 2022. "Who partners up? Homogamy and income inequality in New Zealand cities," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 171-193, January.
    14. Shoshana Grossbard & Lucia Mangiavacchi & William Nilsson & Luca Piccoli, 2022. "Spouses’ earnings association and inequality: A non-linear perspective," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(3), pages 611-638, September.
    15. Stefania Basiglio, 2022. "‘Take the Money and Run’: Dutch Evidence on Inheritance and Transfer Receiving and Divorce," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(3), pages 585-605, November.
    16. Diederik Boertien & Milan Bouchet-Valat, 2020. "Are Increasing Earnings Associations Between Partners of Concern for Inequality? A Comparative Study of 21 Countries," LIS Working papers 793, LIS Cross-National Data Center in Luxembourg.
    17. Basiglio, Stefania, 2018. "Essays on financial behaviour of households and firms," Other publications TiSEM c13423c5-8bf2-44a7-baa7-3, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Earnings inequality; marital sorting; labor supply; Germany;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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