Ilse Lindenlaub, Yale University

Marriage Market and Labor Market Sorting (joint w/Paula Calvo and Ana Reynoso)

Abstract:  We develop a new equilibrium model in which households’ labor supply choices form the link between sorting on the marriage market and sorting on the labor market. We first show that in theory, the nature of home production—whether partners’ hours are complements or substitutes—shapes equilibrium labor supply as well as marriage and labor market sorting. We then estimate our model on German data to empirically assess the nature of home production, and find that spouses’ home hours are complements. We investigate to what extent complementarity in home hours drives sorting and inequality. We find that home production complementarity strengthens positive marriage sorting and reduces the gender gap in hours and labor sorting. This puts significant downward pressure on the gender wage gap and within-household income inequality, but it fuels between-household inequality. Our estimated model sheds new light on the sources of inequality in today’s Germany, and—by identifying important shifts in home production technology toward more complementarity—on the evolution of inequality over time.