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

Raquel Fernández, Nezih Guner () and John Knowles
Authors registered in the RePEc Author Service: John Knowles () and John A. Knowles

No 3040, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: assortative matching; education; fertility; growth; human capital (search for similar items in EconPapers)
JEL-codes: D31 I21 J12 J31 (search for similar items in EconPapers)
Date: 2001-11
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Related works:
Working Paper: Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality (2001)
Working Paper: Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality (2001)
Journal Article: Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality (2005)
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