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According to Pareto, the distribution of income depends on “the nature of the people comprising a society, on the organization of the latter, and, also, in part, on chance.” An overlapping generations model of marriage, fertility and income distribution is developed here. The “nature of the people” is captured by attitudes toward marriage, divorce, fertility, and children. Singles search for mates in a marriage market. They are free to accept or reject marriage proposals. Married agents make their decisions through bargaining about work, and the quantity and quality of children. They can divorce. Social policies, such as child tax credits or child support requirements, reject the “organization of the (society).” Finally, “chance” is modelled by randomness in income, opportunities for marriage, and marital bliss. Download Paper
We argue that one of the key channels linking the labor and marriage markets is the decision of when to become a parent. We develop an equilibrium model of marriage, divorce, and human capital accumulation that allows for differential timing of fertility. We calibrate the model to US panel data and analyze the effects of raising women’s wages relative to men’s, and increasing the rate of return to experience for women. We find that an increase in the returns to experience for women is causes an increase in fraction of children born to women over age 30, and that raising women’s wages reduces marriage rates. Download Paper
This paper examines the interactions between household matching, inequality, and per capita income. We develop a model in which agents decide whether to become skilled or unskilled, form households, consume and have children. We show that the equilibrium sorting of spouses by skill type (their correlation in education) is increasing as a 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, wage inequality, per capita income and fertility differentials are positively correlated across steady states. 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. Download Paper
In this paper, we propose an answer to the following question: if Canada had adopted a social policy similar to that which prevailed until recently in the U.S., would Canada’s income distribution and rate of single-parenthood have looked more like those of the US? Our answer is based on simulations of the Canadian economy under the two alternative social policies, and thus rules out noise from other variations between the two policy regimes. We find that U.S.-style transfer policies can indeed account for most of the higher rate of single-parenthood in the U.S. The Canadian policy is also more effective in alleviating poverty: the poorest 20% of the population are significantly worse off under the U.S. policy. Download Paper