The Co-Movement of Couples' Incomes

Abstract

While there is a large literature on how individual incomes move over time, we know much less about couples' joint income dynamics. Current research on individual income dynamics has increasingly considered heterogeneity - do all individuals' incomes evolve in the same way, or does a particular individual's income evolve in the same way throughout their life? This paper considers the analagous questions for couples - do all couples' incomes move together in the same way, or does a particular couple's incomes move together in the same way throughout their marriage? In particular, I find evidence of correlated volatility; husbands with volatile incomes tend to have wives with volatile ones. I find weaker evidence for heterogeneity in the correlation of husbands' and wives' income changes, with some couples incomes moving together while others moving in opposite directions. Couples' income changes are negatively correlated early in marriage, particularly when young children are present, and become more positively correlated over time.

Keywords: couples, income dynamics, heterogeneity, wife-swap bootstrap

JEL Classification: D31, D13, C33