Assortative Matching and Income Inequality: A Structural Approach

Laura Pilossoph

No 1239, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: Income inequality across households has risen dramatically in the last 40 years. At the same time, marital sorting patterns by education have changed. To quantify the effects of changing degrees of sorting on household income inequality, I develop an equilibrium model of educational attainment, marriage, and joint labor market search. I calibrate the model to couples in the Survey of Income and Program Participation (SIPP), and use the model to construct counterfactual income distributions that keep the sorting parameters unchanged for all education groups. Relative to the standard decompositional methods, this approach incorporates both partial and general equilibrium impacts of changes in sorting parameters, which feed back into educational attainment and marriage choices.

Date: 2016
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