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Beyond Inequality Accounting: Marital Sorting and Couple Labor Supply

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  • Pestel, Nico

    () (IZA)

Abstract

This paper examines to what extent non-random sorting of spouses affects earnings inequality while explicitly disentangling effects from increasing assortativeness in couple formation from changing patterns of couples' labor supply behavior. Using German micro data, earnings distributions of observed and randomly matched couples are compared to each other. Earnings of hypothetical couples are adjusted for changes in hours worked given the differences in the household context using predictions based on a structural model of labor supply. The main finding is that the impact of marital sorting on earnings inequality has been underestimated in previous approaches. Predicting hours worked for hypothetical couples reveals a strong disequalizing impact of nonrandom sorting on inequality which is stable since the 1980s. Taking labor supply choices as given would suggest a smaller effect. This suggests that increasing earnings correlation among couples is to a considerable extent driven by changing patterns of labor market behavior rather than changes in the assortativeness in couple formation.

Suggested Citation

  • Pestel, Nico, 2014. "Beyond Inequality Accounting: Marital Sorting and Couple Labor Supply," IZA Discussion Papers 8482, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp8482
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    1. repec:spr:demogr:v:54:y:2017:i:3:d:10.1007_s13524-017-0576-0 is not listed on IDEAS
    2. Andreas Peichl & Martin Ungerer, 2016. "Accounting for the spouse when measuring inequality of opportunity," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(3), pages 607-631, October.
    3. Klemm, Marcus & Weigert, Benjamin, 2014. "Does composition matter? Wage inequality and the demographic and educational structure of the labor force in Gemany," Working Papers 06/2014, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    4. Handy, Christopher, 2014. "Assortative Mating and Intergenerational Persistence of Schooling and Earnings," MPRA Paper 63829, University Library of Munich, Germany.

    More about this item

    Keywords

    earnings inequality; sorting; labor supply; Germany;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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