Economics of the Family (4): marriage and matching

A friend of mine, a future environmental economist, once questioned the practicality of marriage sorting theories: “Can marriage decisions really be modeled in economics? It seems impossible to me, because these are complicated decisions that affect life outcomes over a long time. And even if we can model it, what’s the use?”

Such concerns are probably widely held. One might doubt the validity of marriage theories for they assume people rationally weigh their benefits against costs in their lifetime before they say “I do”. Obviously, economists cannot model everything that is involved in marriage decisions, but can outline several aspects that are likely to govern marriage decisions. Gary Becker (1973) models marriage decision as a two-way matching process, where people get married only when both individuals are better off married than single and prefer this spouse than all other potential spouses. Individuals get married in order to produce household goods (“Z goods” in Becker terms) that contribute to their well-being (utility). If we assume there is only one attribute (say, intelligence) that matters in Z good production, then individuals will find partners with similar (opposite) levels of this attribute if men and women’s attributes are complementary (substitutes) in the production. These are called positive (negative) sorting.

Note that the “Z goods” are loosely defined and can range from meals cooked together to children raised. Becker’s framework is no longer applicable if we want to incorporate gay marriage, as we have to rearrange the groups according to people’s sexuality preferences.

Does getting married affect people’s earnings? There is evidence that married white men enjoy a “marriage premium”. On its surface one might conclude that getting married makes men more productive. But higher earnings might reflect the selection of capable individuals into marriage (Chun and Lee, 2001) or a correlation between higher valuation of family goods and greater earning potential (Reed, Robert, and Harford, 1989). Moreover, economists do not perfectly observe how people define “before” and “after” marriage. Surveys do not accurately reflect the true timeline of individual decisions because “after” might appear way before than economists realize it. Respondents might actively seeking promotion and pay increases before marriage to prepare for a married life. Such patterns are shown in Dougherty (2006).

My next post will be on fertility decisions and investment in children. Quality-quantity tradeoff will surely be covered.

References:

Becker, G. 1973. “A Theory of Marriage: Part I.” Journal of Political Economy 81(4): 813-846.

Chun, Hyunbae, and Injae Lee. 2001. “Why do married men earn more: Productivity or marriage selection?.” Economic Inquiry 39(2): 307-319.

Dougherty, C. 2006. “The Marriage Earnings Premium as a Distributed Fixed Effect.” Journal of Human Resources 41(2): 433-443.

Reed, W. Robert, and Kathleen Harford. 1989. “The marriage premium and compensating wage differentials.” Journal of Population Economics 2(4): 237-265.
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