Relationship Skills in the Labor and Marriage Markets

This paper examines the role of relationship skills in determining life cycle outcomes in education, labor and marriage markets. We posit a two-factor model with human capital and "relationship" or "partnering" skill. Relationship skill is understood in our framework as the ability to maintain long-term relationships, both in the formal job market and the home sector. Using a Mincer-Jovanovic (1981) framework and evidence on job and marital separations in the PSID, we argue that relationship skills are naturally modeled as an individual fixed factor that increases the durability of relationships in multiple sectors. Next, we use data from the Occupational Information Network to extract and develop a common factor from measures of non-cognitive skills that reduce divorce and job loss likelihood conditional on partners' wages and education. In both empirical and numerical analysis, we show that this factor operates differently in the market and home sectors. It is highly complementary in the market sector but fairly substitutable in the home sector: that is, stability of marriage depends most strongly on at least one partner being endowed with strong partnering skills. It therefore stands in contrast to measures of more general human capital, such as educational attainment that are highly complementary inputs into marriage. To explore the quantitative implications of relationship skill, we use the PSID to develop and estimate a two-factor life cycle model of schooling, job search and marriage that allows us to test the importance of partnering skills, including their implications for optimal schooling and occupational decisions, and the joint distribution of relationship skills and human capital in the population.