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