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Marriage and Employment Participation with Wage Bargaining in Search Equilibrium

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  • Roberto Bonilla
  • Alberto Trejos

Abstract

The empirical literature addressing links between the labor and marriage markets is numerous. Despite this, the theoretical literature that explicitly links the two markets is less developed, particularly so with frictional markets. We build an equilibrium search model where married couples make joint decisions on home production and labor market participation. A worker’s bargaining position reflects their own productivity, and also the employment status and conditions of their spouse. We find that partners with very different productivities have different strategies regarding labor market participation. In symmetric couples, the partners behave symmetrically. Workers get better job offers when their spouses are employed, and in some equilibria a person may search for transitory jobs only to raise the long-term wages of their spouse. In some cases, firms unilaterally increase a worker’s wage in order to reduce turnover, by ensuring that the spouse stays at home. If they do may be a matter of multiple equilibria, depending on parameter values. All this provides an additional explanation for wage and search behavior heterogeneity of similar workers and/or couples. We show that the assumptions in Burdett-Coles (1997) do not apply for a marriage market linked to this labor market and discuss the consequences of this.

Suggested Citation

  • Roberto Bonilla & Alberto Trejos, 2017. "Marriage and Employment Participation with Wage Bargaining in Search Equilibrium," CESifo Working Paper Series 6543, CESifo.
  • Handle: RePEc:ces:ceswps:_6543
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    References listed on IDEAS

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    1. Bonilla Roberto & Burdett Kenneth, 2010. "On-the-Job Search and Labor Market Equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-28, March.
    2. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 352-369.
    3. Younghwan Song, 2007. "The working spouse penalty/premium and married women’s labor supply," Review of Economics of the Household, Springer, vol. 5(3), pages 279-304, September.
    4. Roberto Bonilla & Francis Kiraly & John Wildman, 2019. "Beauty Premium And Marriage Premium In Search Equilibrium: Theory And Empirical Test," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 851-877, May.
    5. Christine Schwartz & Robert Mare, 2005. "Trends in educational assortative marriage from 1940 to 2003," Demography, Springer;Population Association of America (PAA), vol. 42(4), pages 621-646, November.
    6. Ken Burdett & Melvyn G. Coles, 1997. "Marriage and Class," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 141-168.
    7. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, vol. 24(C), pages 107-115.
    8. Nicolas Jacquemet & Jean-Marc Robin, 2013. "Assortative matching and search with labor supply and home production," CeMMAP working papers CWP07/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    labour market participation; wage formation; marriage market; linked frictional markets;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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