Who Partners Up? Educational Assortative Matching and the Distribution of Income in New Zealand

Abstract

Educational assortative matching among couples, i.e. the phenomenon whereby the high-educated have partners who are also high-educated, has gained attention in popular media and academic research as a driver of recent changes in the distribution of household income. We examine the effect of educational assortative matching on the distribution of household income in New Zealand - a country which has experienced rising inequality, increased educational attainment and a relatively low, and falling, wage premium for higher levels of education. Using data from the 1986, 1991, 1996, 2001, 2006 and 2013 Census of Population and Dwellings and a counterfactual randomisation methodology that accounts for secular changes in the educational distribution, we find that educational assortative matching has increased but, contrary to some evidence overseas, this increase was driven by increased matching in the middle of the educational distribution. Spatially, we find higher and increasing levels of educational assortative matching in metropolitan areas compared to non-metropolitan areas where assortative matching was lower and decreasing. We find that educational assortative matching has had an inequality-increasing impact on the distribution of income, especially for the full-time employed – for whom the matching impact is around 20 percent of the Mean Log Deviation measure of inequality. Additionally, sorting on observable characteristics such as age and location (with the higher educated being disproportionally attracted to the metropolitan areas) are also inequality-increasing and sorting on unobservable characteristics that impact on income can play an important role as well.

Keywords: assortative matching, inequality

JEL Classification: D31, J12, R23