Preferences over Relative Income within the Household

Johannes Hermle (), Elena Herold () and Nikolaus Hildebrand
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Johannes Hermle: UC Berkeley
Elena Herold: Ifo Institute for Economic Research
Nikolaus Hildebrand: MIT

No 16803, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: What preferences do partners hold over their relative income within the household? We provide a flexible framework of preferences over relative income within the household that captures various motives, including inequality aversion and a preference for being the primary earner. We study the role of these preferences for marital selection, separation and household public good provision in a marriage market matching model with search frictions. We test the model predictions using large administrative tax data from Germany. We document the existence of a kink point in the relative income distribution at the point of spousal income equality, consistent with the presence of kinked preferences over relative income. We also find the presence of a convex kink in wives' household public good provision, suggesting that women bear the incidence of spousal relative income preferences. To disentangle the preferences of women and men, we implement a survey experiment. Our results indicate that women exhibit inequality aversion while men exhibit a preference for being the primary earner.

Keywords: relative income concerns; relative income distribution (search for similar items in EconPapers)
JEL-codes: D63 D64 D91 J12 J16 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2024-02
New Economics Papers: this item is included in nep-lab
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