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Equilibria in a model with a search labour market and a matching marriage market

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  • Bonilla, Roberto
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    Abstract

    I analyse an economy where a search labour market 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. I assume that 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. Noisy search in the labour market generates a distribution of wages. I show that the so called married wage premium can be the consequence of frictions in both markets, without having to resort to the typical explanations. In one equilibrium, MPs marry all workers, regardless of their employment status. In a more interesting equilibrium, MPs marry only high earners, while workers accept wages that render them "unmarriageable". The workers' reservation wage must compensate them for the loss of marriageability in addition to the option of continued search for better wages. This affects the distributions of wages offered and earned, which are crucial in the MPs decision to marry/reject low earners.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15881.

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    Date of creation: 12 Feb 2009
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    Handle: RePEc:pra:mprapa:15881

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    Keywords: Search; Married wage premium; matching markets;

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    1. David S. Loughran, 2002. "The Effect Of Male Wage Inequality On Female Age At First Marriage," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 237-250, May.
    2. Donna K. Ginther & Madeline Zavodny, 2001. "Is the male marriage premium due to selection? The effect of shotgun weddings on the return to marriage," Journal of Population Economics, Springer, vol. 14(2), pages 313-328.
    3. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 955-69, July.
    4. Kenneth Burdett & Ricardo Lagos & Randall Wright, 2002. "Crime, Inequality, and Unemployment, Second Version," PIER Working Paper Archive 03-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2003.
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