Marriage, Divorce and Reservation Wages

Roberto Bonilla, Francis Kiraly, Miguel Malo and Fernando Pinto Hernández

No 11123, CESifo Working Paper Series from CESifo

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.

Keywords: frictional labour markets; frictional marriage markets; reservation wages (search for similar items in EconPapers)
JEL-codes: D83 J12 J16 J31 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-lab
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