I analyse an economy where a search labour market with an endogenous wage distribution and a matching marriage market interact. The economy is populated by homogeneous workers, firms and marriage partners (MPs). Workers simultaneously search for firms in order to work and for MPs in order to marry. Firms post wages to attract workers. MPs look for workers in order to marry. Married workers receive a pre-determined flow utility, and married MPs derive flow utility equal to the worker’s earnings. This provides the link between the markets. By interpreting workers and MPs as men and women respectively, I show that the so called married wage premium can arise purely from frictions in both markets. Also, the paper may explain the simultaneous occurrence of three stylised facts: In the model, an increase in the value of women’s option outside marriage leads to a decrease in marriage rates and an increase in the spread of the male wage distribution.
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Paper provided by Economics and Econometrics Research Institute (EERI) in its series EERI Research Paper Series with number
EERI_RP_2009_31.
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