Societies are characterized by customs governing the allocation of non-market goods such as marital partnerships. We explore how such customs affect the educational investment decisions of young singles and the subsequent joint labour supply decisions of partnered couples. We consider two separate matching paradigms for agents with heterogeneous abilities - one where partners marry for money and the other where partners marry for romantic reasons orthogonal to productivity or debt. These generate different investment incentives and therefore have a real impact on the market economy. While marrying for money generates greater investment efficiency, romantic matching generates greater allocative efficiency, since more high ability individuals participate in the labour market. The analysis offers the possibility of explaining cross-country differences in educational investments and labour force participation based on matching regimes.
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George J. Mailath & Andrew Postlewaite, 2002.
"Social Assets,"
PIER Working Paper Archive
06-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 04 Jun 2004.
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George J. Mailath & Andrew Postlewaite, 2002.
"Social Assets,"
PIER Working Paper Archive
04-025, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 04 Jun 2004.
[Downloadable!]
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"Social Assets,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1057-1091, November.
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"A Matching Model with Endogenous Skill Requirements,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
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Alison L. Booth & Melvyn B. Coles, 2008.
"Tax Policy and Returns to Education,"
CEPR Discussion Papers
591, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
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