chapter 3 marriage and the family marriage and family trends gains from marriage marriage market...
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Chapter 3 Marriage and the Chapter 3 Marriage and the FamilyFamilyChapter 3 Marriage and the Chapter 3 Marriage and the FamilyFamily
• marriage and family trends
• gains from marriage
• marriage market
• marriage and family trends
• gains from marriage
• marriage market
Why marriage?Why marriage?Why marriage?Why marriage?
• Eventually over 90% of adults will be married at some point in their lives
• for women marriage has been occupation identity
• Eventually over 90% of adults will be married at some point in their lives
• for women marriage has been occupation identity
• family structure has a big influence on economic well-being U.S. poverty rate overall: 12%
• for married couples: 5.5%
• for female-headed households: 26%
• family structure has a big influence on economic well-being U.S. poverty rate overall: 12%
• for married couples: 5.5%
• for female-headed households: 26%
marriage is economic behaviormarriage is economic behaviormarriage is economic behaviormarriage is economic behavior
• women and men choose to get married, when to get married, who to marry, to maximize their well-being
• women and men choose to get married, when to get married, who to marry, to maximize their well-being
a family is a mini-economya family is a mini-economya family is a mini-economya family is a mini-economy
• production
• allocation of scarce resources what to buy with/in budget use of time
• production
• allocation of scarce resources what to buy with/in budget use of time
I. A look at dataI. A look at dataI. A look at dataI. A look at data
• marriage
• households
• household income
• marriage
• households
• household income
Median Age of 1st Marriage
15
20
25
30
1890 1910 1930 1950 1970 1990
Males Females
23.817.1
25.8
18.9
26.8
19.4
27
21.1
0
10
20
30
1980 1990 1995 2000
% of Population Never Marriedmen women
32.3
5950.2
68.669.1
78.8
0
10
20
30
40
50
60
70
80
1950 1980 2000
% never married, 20-24
women
men
30
39.7
20.8
0
10
20
30
40
Hispanic Black White
% women never married, 15+ 2000
3.4 2.7
107.4
16.3
13.2
0
5
10
15
20
1950 1980 2000
% divorced, 35-59
women
men
cohabitationcohabitationcohabitationcohabitation
• POSSLQ (Census Bureau) risen from 1% to 7.5% of married
couples 10% of adults 25-29 cohabitate
• same-sex couples not directly tracked estimated at most 360,000 HH
• POSSLQ (Census Bureau) risen from 1% to 7.5% of married
couples 10% of adults 25-29 cohabitate
• same-sex couples not directly tracked estimated at most 360,000 HH
2000 census2000 census2000 census2000 census
• less than 5% of men and women over 65 have never been married
• conclusion: most people expect marriage to
make them better off
• less than 5% of men and women over 65 have never been married
• conclusion: most people expect marriage to
make them better off
Households (HH) in the U.S.Households (HH) in the U.S.Households (HH) in the U.S.Households (HH) in the U.S.
• 290 million people (2001)
• 109 million HH HH is people who occupy same
housing unit
(house, apt. , dorm room) Family HH includes related people
• 290 million people (2001)
• 109 million HH HH is people who occupy same
housing unit
(house, apt. , dorm room) Family HH includes related people
$42,228
$24,386
$52,275$60,471
$25,745 $36,590
All Households
Nonfamily Ho...
Family House...
Married Couple
Female headed
Male headed
U.S. Households Median Income 2001
U.S. Family Households, 2001
76%
18%
6%
Married Couple Female headed Male headed
All Married Couples, 2001
22% 56%
6%
16%
Both in Labor Force Only Husband in Labor Force
Only Wife in Labor Force Neither in Labor Force
Married HH Median Income, 2001
$70,000
$50,000
$37,000$28,000
$0$10,000$20,000$30,000$40,000
$50,000$60,000$70,000$80,000
Both in LaborForce
Only Husband inLabor Force
Only Wife inLabor Force
Neither in LaborForce
Size of Households in the U.S., 2001
16%
15%
10%
25%
34%
1 person 2 persons 3 persons
4 persons 5 or more persons
II. Gains to MarriageII. Gains to MarriageII. Gains to MarriageII. Gains to Marriage
• specialization
• principal-agent problem
• economies of scale
• risk sharing
• specialization
• principal-agent problem
• economies of scale
• risk sharing
SpecializationSpecializationSpecializationSpecialization
• we observe men tend to be larger earner in HH
(sole earner 22% of HH) women in HH spend more time on
housework, childcare, etc
• we observe men tend to be larger earner in HH
(sole earner 22% of HH) women in HH spend more time on
housework, childcare, etc
example: Ed & Lizexample: Ed & Lizexample: Ed & Lizexample: Ed & Liz
• choose between market & nonmarket work
• Liz $500 week in market work OR $400 week in nonmarket work OR something in between
• choose between market & nonmarket work
• Liz $500 week in market work OR $400 week in nonmarket work OR something in between
• Ed $1000 week in market work OR $420 week in nonmarket work OR something in between
• Ed $1000 week in market work OR $420 week in nonmarket work OR something in between
market
nonmarket
1000
420
500
400
Ed
Liz
• Ed has absolute advantage in BOTH market & nonmarket work 1000 > 500 420 > 400
• why did he marry Liz? still gains from specializing &
sharing output
• Ed has absolute advantage in BOTH market & nonmarket work 1000 > 500 420 > 400
• why did he marry Liz? still gains from specializing &
sharing output
comparative advantagecomparative advantagecomparative advantagecomparative advantage
• Liz is close to Ed in nonmarket production but way worse in market
production Liz has comp. adv. in nonmarket
work• gains to specializing
• Liz is close to Ed in nonmarket production but way worse in market
production Liz has comp. adv. in nonmarket
work• gains to specializing
case 1: Ed & Liz do not sharecase 1: Ed & Liz do not sharecase 1: Ed & Liz do not sharecase 1: Ed & Liz do not share
• time divided 60% market work 40% nonmarket work do not share
• time divided 60% market work 40% nonmarket work do not share
• Liz $300 in market work $160 in nonmarket work
• Ed $600 in market work $168 in nonmarket work
• Liz $300 in market work $160 in nonmarket work
• Ed $600 in market work $168 in nonmarket work
market
nonmarket
1000
420
500
400
case 2: Ed & Liz specializecase 2: Ed & Liz specializecase 2: Ed & Liz specializecase 2: Ed & Liz specialize
• Ed does market work gives Liz 35%
• Liz does nonmarket work gives Ed 50%
• Ed does market work gives Liz 35%
• Liz does nonmarket work gives Ed 50%
resultsresultsresultsresults
• Ed produces $1000 gives Liz $350, keeps $650
• Liz produces $400 gives Ed $200, keeps $200
• Ed produces $1000 gives Liz $350, keeps $650
• Liz produces $400 gives Ed $200, keeps $200
• Ed $650 market, $200 nonmarket (case 1: $600, $168)
• Liz $350 market, $200 nonmarket (case 1: $300, $160)
• Ed $650 market, $200 nonmarket (case 1: $600, $168)
• Liz $350 market, $200 nonmarket (case 1: $300, $160)
market
nonmarket
1000
420
500
400
Liz
Ed
By specializing,
both Ed and Liz do better
why does this work?why does this work?why does this work?why does this work?
• each specialize in what they do best, relative to their partner
• Liz specializing in nonmarket work
frees Ed to specialize in market work which he does way better
• each specialize in what they do best, relative to their partner
• Liz specializing in nonmarket work
frees Ed to specialize in market work which he does way better
• specialization does NOT have to be complete for there to be gains 56% of married households both
spouses in labor force
• specialization does NOT have to be complete for there to be gains 56% of married households both
spouses in labor force
• men have absolute adv. in market work because they earn more gender earning gap reinforces the
gender earnings gap
• men have absolute adv. in market work because they earn more gender earning gap reinforces the
gender earnings gap
notenotenotenote
• if men, women very different in skills larger gains to specialization
• if men, women more alike smaller gains to specialization
• if men, women very different in skills larger gains to specialization
• if men, women more alike smaller gains to specialization
Principal-agent Principal-agent Principal-agent Principal-agent
• someone (principal) hires
someone else (agent)
to do something
• problem:
agent may not act in best interest of principal
• someone (principal) hires
someone else (agent)
to do something
• problem:
agent may not act in best interest of principal
exampleexampleexampleexample
• mechanic does unnecessary repairs
• babysitter puts kids in front of TV
• CEO buys $6000 shower curtain
• cause: incentive structure lack of monitoring
• mechanic does unnecessary repairs
• babysitter puts kids in front of TV
• CEO buys $6000 shower curtain
• cause: incentive structure lack of monitoring
marriagemarriagemarriagemarriage
• incentive: love, respect, shared goals care about the other’s utility
• incentive: love, respect, shared goals care about the other’s utility
Economies of scaleEconomies of scaleEconomies of scaleEconomies of scale
• average cost of production falls as production rises
Many HH chores done for 1 person,
are just as easy to do for 2 or 3 people
• average cost of production falls as production rises
Many HH chores done for 1 person,
are just as easy to do for 2 or 3 people
examplesexamplesexamplesexamples
• Cooking for 1 vs. 2 Cleaning, shopping, laundry
• In HH with more than 1 Less time spent PER PERSON
on these tasks Tasks are shared
• Cooking for 1 vs. 2 Cleaning, shopping, laundry
• In HH with more than 1 Less time spent PER PERSON
on these tasks Tasks are shared
• Buying in bulk
• Share fixed costs of HH Furniture Appliances Bills (phone, cable…)
• Buying in bulk
• Share fixed costs of HH Furniture Appliances Bills (phone, cable…)
notenotenotenote
• if HH is really large, diseconomies of scale as tasks
take longer
• do not need to marry to get economies of scale
• if HH is really large, diseconomies of scale as tasks
take longer
• do not need to marry to get economies of scale
Risk-sharingRisk-sharingRisk-sharingRisk-sharing
• HH with multiple earners less likely to suffer financial distress
• HH with multiple earners better able to diversify employers investments
• true more for spouses than roommates
• HH with multiple earners less likely to suffer financial distress
• HH with multiple earners better able to diversify employers investments
• true more for spouses than roommates
III. The Marriage MarketIII. The Marriage MarketIII. The Marriage MarketIII. The Marriage Market
• notation ZM = total output of single man
ZF = total output of single woman
ZMF = total output of married HH
• SF = wife’s share of ZMF wife
• SM = husband’s share of ZMF
= ZMF - SF
• notation ZM = total output of single man
ZF = total output of single woman
ZMF = total output of married HH
• SF = wife’s share of ZMF wife
• SM = husband’s share of ZMF
= ZMF - SF
• if SM > ZM then man will marry
• if SF > ZF then woman will marry
• since most people marry, then usually
ZMF > ZM + ZF
• if SM > ZM then man will marry
• if SF > ZF then woman will marry
• since most people marry, then usually
ZMF > ZM + ZF
Supply Supply Supply Supply
• supply of women willing to marry how many women will marry at
each level of SF
if SF high, a lot of women will want to marry
as SF falls, fewer women will want to marry
• supply of women willing to marry how many women will marry at
each level of SF
if SF high, a lot of women will want to marry
as SF falls, fewer women will want to marry
SF
# of women
Supply
max. amountof women
DemandDemandDemandDemand
• demand curve of men for wives how many men are willing to marry at
each level of SF
if SF high, then SM is low,
and few men will want to marry as SF falls, SM rises,
so more men will want to marry
• demand curve of men for wives how many men are willing to marry at
each level of SF
if SF high, then SM is low,
and few men will want to marry as SF falls, SM rises,
so more men will want to marry
SF
# of women,men
Supply
Demand
N*
SF*
comparative staticscomparative staticscomparative staticscomparative statics
• what happens when sex ratio changes women’s wages change there is a sexual revolution
• what happens when sex ratio changes women’s wages change there is a sexual revolution
change in sex ratiochange in sex ratiochange in sex ratiochange in sex ratio
• # women per 100 men
• how? war changing birth rates
• (men marry younger women) gender preference
• (China)
• # women per 100 men
• how? war changing birth rates
• (men marry younger women) gender preference
• (China)
rising sex ratiorising sex ratiorising sex ratiorising sex ratio
• increase in women relative to men
• supply increases shifts right
• increase in women relative to men
• supply increases shifts right
SF
# of women,men
Supply
Demand
N*
SF*
Supply
rising female wagesrising female wagesrising female wagesrising female wages
• increases ZF
women less willing to marry at any given level of SF
• supply decreases shift left
• increases ZF
women less willing to marry at any given level of SF
• supply decreases shift left
SF
# of women,men
Supply
Demand
N*
SF*
sexual revolutionsexual revolutionsexual revolutionsexual revolution• contraception makes sex outside of
marriage less risky single well-being increases
• ZM and ZF increase
women less willing to marry• supply decreases
men less willing to marry• demand decreases
• contraception makes sex outside of marriage less risky single well-being increases
• ZM and ZF increase
women less willing to marry• supply decreases
men less willing to marry• demand decreases
SF
# of women,men
Supply
Demand
N*
SF*
summarizesummarizesummarizesummarize
• marriage still popular but marriages less likely to last people wait longer to marry
• gains to marriage from various sources size of gains affected by
differences in skills
• marriage still popular but marriages less likely to last people wait longer to marry
• gains to marriage from various sources size of gains affected by
differences in skills
• marriage market determines position of
husband/wife in marriage determines # of marriages explains how demographic, labor
market, and social changes affects marriage
• marriage market determines position of
husband/wife in marriage determines # of marriages explains how demographic, labor
market, and social changes affects marriage
looking ahead to Ch. 4looking ahead to Ch. 4looking ahead to Ch. 4looking ahead to Ch. 4
• race and family structure
• marriage and men’s earnings
• divorce
• race and family structure
• marriage and men’s earnings
• divorce
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