Household Search and the Marital Wage Premium

We develop a model where selection into marriage and household search generate a marital wage premium. Beyond selection, married individuals earn higher wages for two reasons. First, income pooling within a joint household raises risk-averse individuals’ reservation wages. Second, married individuals climb the job ladder faster, as they internalize that higher wages increase their partner’s selectivity over offers. Specialization according to comparative advantage in search generates a premium that increases in spousal education, as in the data. Quantitatively, household search explains 10–33 percent and 20–58 percent of the premium for males and females, respectively, and accounts for its increase with spousal education. (JEL D83, J12, J16, J24, J31, J64)

A Research Note on Income Pooling in Partnerships: Incorporating Nonresident Children

Income pooling is a common behavior among couples. However, cohabiting and married individuals in more complex families, namely those with stepchildren, are less likely to pool incomes. Similarly, income pooling might be unlikely when there are nonresident children, who could potentially draw resources outside the household, yet prior work has largely overlooked the role of nonresident children. We take advantage of a unique data set, the Family and Relationships Study, which allows us to not only identify shared and unshared children (i.e., stepchildren) within the household but also unshared children outside the household. Focusing on cohabiting and married individuals ( N = 4,408), we find that those with resident unshared children are less likely to pool incomes but that nonresident children are unrelated to income pooling. The results confirm that household-level complexity is a key factor in couples’ economic decision making.

Understanding the Marriage–Cohabitation Gap in Income Pooling: Evidence from 29 European Countries

Pooling all incomes was long seen as the norm in male-breadwinner marriages, but in a time of dual-earner families, cohabitation, and divorce, the underpinnings of this model are eroding. What consequences does this have for income pooling? We compare ca. 130,000 married and cohabiting couples from 29 European countries in the 2010 European Union Survey of Income and Living Conditions (EU-SILC) via random effects logit models. We show that cohabiting couples are generally more likely than married couples to keep at least some income separately, the so-called cohabitation gap. Roughly a fifth of this gap we can attribute to compositional differences between married and cohabiting couples. Further, the cohabiting group is heterogeneous and smaller when comparing only couples with children or only couples with a long relationship duration. Lastly, we show that there is substantial variation in the size of the cohabitation gap across countries. The size of this gap varies with the country-specific cohabitation rate, divorce rate, and female labor force participation rate. While there is considerable heterogeneity among cohabiting couples, married and cohabiting couples remain distinct in their resource-sharing behavior. Income pooling does not become more comparable when cohabitation, marital instability, and women’s economic independence become more widespread in the broader society. Our study reconciles disparate findings of previous cross-national research on the cohabitation gap.

Income sharing and spending decisions of young people living with their parents

This chapter examines income sharing by young adults living with their parents. Using data from EU-SILC 2010, the chapter explores the determinants of contributions to household expenses among young adults (aged 18–34 years) living with their parents in 17 European Union countries. The examination finds that income sharing in the household tends to attenuate income differences between household members and to help members with low resources. The results also show inequalities in young adults’ experience of co-residence with parents: young adults in low-income households tend to contribute more to the household than do those in higher income homes. In addition, the results show that the majority of young adults benefit from intra-household sharing of resources. There is, however, a minority of young adults whose income is lower when the actual extent of income pooling is taken into account in the calculation of equivalized household income.

HOUSEHOLD BARGAINING, FINANCIAL DECISION-MAKING AND RISK TOLERANCE

This study examines the financial investment decision-making and risk behaviors ofMalaysian men and women. It uses data obtained from a survey of employed Malaysians totest two opposing models of household decision making, the income pooling hypothesis andthe bargaining model. Ordinal probit regressions are estimated to determine if earning shareaffects decisions on financial investments, and to identify factors that affect risk tolerance ofmen and women. The results indicate that although both men and women practice autonomyin decisions related to financial investments, women have lower risk tolerance than men.The results on decision making are consistent with the bargaining model as reflected in theimportance of relative earning share in financial decision making.Keywords: Malaysia; Income Pooling Hypothesis; Bargaining Model; Financial Decision-Making; Risk Tolerance; Household.