TY - JOUR
T1 - Love and money
T2 - A theoretical and empirical analysis of household sorting and inequality
AU - Fernández, Raquel
AU - Guner, Nezih
AU - Knowles, John
N1 - Funding Information:
* We thank Michael Kremer and Torsten Persson for stimulating discussions of our paper in the NBER Economic Fluctuations and Growth Research Meeting and in the CEPR Public Policy Conference, respectively. We thank Alberto Alesina and three anonymous referees for valuable suggestions. We also wish to thank Daron Acemoglu, Orazio Attanasio, Oriana Bandiera, Jere Behrman, Jess Ben-habib, Alberto Bisin, Jason Cummins, Paolo Dudine, William Easterly, Luca Flabbi, Christopher Flinn, Mark Gertler, David Green, Sydney Ludvigson, Jonathan Portes, Neil Wallace, David Weil, and participants in numerous seminars for helpful comments. We thank Miguel Szekely and Alejandro Gaviria at the Inter-American Development Bank for assistance with the Latin-American data and the Luxembourg Income Study and the statistical agencies of the Latin American countries in our sample for access to the surveys. The first and third authors acknowledge financial support from their respective National Science Foundation grants, and the first author from the CV Starr Center at New York University as well.
PY - 2005/2
Y1 - 2005/2
N2 - This paper examines the interactions between household formation, inequality, and per capita income. We develop a model in which agents decide to become skilled or unskilled and form households. We show that the equilibrium sorting of spouses by skill type (their correlation in skills) is an increasing function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting and wage inequality is positively correlated across steady states and negatively correlated with per capita income. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses' education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables. We also find that sorting and per capita GDP are negatively correlated and that greater discrimination against women leads to more sorting, in line with the predictions of our model.
AB - This paper examines the interactions between household formation, inequality, and per capita income. We develop a model in which agents decide to become skilled or unskilled and form households. We show that the equilibrium sorting of spouses by skill type (their correlation in skills) is an increasing function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting and wage inequality is positively correlated across steady states and negatively correlated with per capita income. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses' education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables. We also find that sorting and per capita GDP are negatively correlated and that greater discrimination against women leads to more sorting, in line with the predictions of our model.
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U2 - 10.1162/0033553053327498
DO - 10.1162/0033553053327498
M3 - Article
AN - SCOPUS:15544369609
SN - 0033-5533
VL - 120
SP - 273
EP - 344
JO - Quarterly Journal of Economics
JF - Quarterly Journal of Economics
IS - 1
ER -