Education, segregation and marital sorting: Theory and an application to the UK

Raquel Fernández

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper presents a model of the intergenerational transmission of education and marital sorting. Parents matter both because of their household income and because their human capital determines the distribution of a child's disutility from making an effort to become skilled. We show that an increase in segregation has potentially ambiguous effects on the proportion of individuals that become skilled in the steady state, and hence on marital sorting, the personal and household income distribution, and welfare. We calibrate the steady state of our model to UK statistics. We find that an increase in the correlation of spouses in their years of education will bring about a small increase in the proportion of skilled individuals when the relative supply of skilled individuals is variable at the family level and a decrease when this supply is fixed. Ex-ante utility (of an unborn individual) increases in the first case and decreases in the second. The welfare effect of increased sorting is negative for unskilled individuals and positive for skilled individuals. Increased segregation always leads to an increase in welfare inequality between skilled and unskilled individuals.

    Original languageEnglish (US)
    Pages (from-to)993-1022
    Number of pages30
    JournalEuropean Economic Review
    Volume46
    Issue number6
    DOIs
    StatePublished - 2002

    Keywords

    • Education
    • Household matching
    • Income distribution
    • Skill premium
    • Sorting

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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