Dynamic Effects of Educational Assortative Mating on Labor Supply
93 Pages Posted: 22 Apr 2021
Date Written: August 21, 2020
The gender education gap has undergone a transition in the post-war period, from favoring men to favoring women. As a consequence, in 30% of young American couples, the wife is more educated than the husband. These \married down" women display substantially higher employment rates, relative to women with husbands with the same or higher level of educational attainment. In this paper, we argue that the combined effect of mating on the marriage market and life time labor supply decisions can explain the higher employment rates of women who marry down. Returns to experience are key in this mechanism, as they lock in early employment choices. To analyze this mechanism, we formulate a dynamic life cycle model of marriage and divorce, with endogenous labor supply decisions, and structurally estimate it using NLSY79. We show that returns to experience account for 55% of the employment gap between married down women and those who married up. The estimates further suggest that the changes in educational sorting patterns across cohorts can explain 10% of the rise in married women's employment between the 1945 and 1965 cohort. We simulate labor supply elasticities and find that the couple's education gap strongly affects women's elasticity. We also use the model to simulate a shift from joint to individual taxation. The model predicts a 5.4% increase in married women's employment and a 7% increase in marriage rate, comprised mainly of households in which the wife is married down.
Keywords: educational assortative mating, female labor supply, human capital, returns to experience
JEL Classification: D1, J22, J12, J24, J31
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