Love and Money with Inheritance: Marital Sorting by Labor Income and Inherited Wealth in the Modern Partnership

64 Pages Posted: 20 Aug 2018 Last revised: 18 Nov 2021

See all articles by Etienne Pasteau

Etienne Pasteau

Paris School of Economics (PSE)

Junyi Zhu

Deutsche Bundesbank

Date Written: 2018

Abstract

As the importance of capital is resurging in rich countries, the dynamics of wealth inequality are being increasingly affected by inheritance distribution. The relative attraction derived from inherited wealth and acquired human capital in marital choices may be undergoing change. We expand the traditional dimension of assortative mating through labor income only, covering both labor income and inheritance. This paper studies the concentration and substitutability of these two traits in forming partnerships using data for Germany from the Panel on Household Finances (PHF). Relative to France, Germany's aristocratic wealth has experienced more negative shocks since WWII, social stratification is perceived as less acute, and half of the country went through decades of communism. However, our results come quantitatively close to the distributional outcomes seen in France. By assuming a sequential revelation of inheritance and labor income in marital sorting, we develop a stylized multidimensional matching model which adequately replicates the sorting pattern observed using marginal distributions of these two traits from either gender. Our estimate suggests inheritance is about two and a half times more important than labor income in explaining marriage choice. This quantitative result seems to characterize the expected lifetime inheritance and labor income after marriage for Germany under the actual rate of return, growth rate, demographics as well as rapid expansion of bequest flows in recent history.

Keywords: Assortative mating, Inheritance, Labor income, Multidimensional matching

JEL Classification: D31, J12, D64, D83

Suggested Citation

Pasteau, Etienne and Zhu, Junyi, Love and Money with Inheritance: Marital Sorting by Labor Income and Inherited Wealth in the Modern Partnership (2018). Available at SSRN: https://ssrn.com/abstract=3234187 or http://dx.doi.org/10.2139/ssrn.3234187

Etienne Pasteau (Contact Author)

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Junyi Zhu

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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