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