In recent years, increasing income equality in developed countries has been a hot topic among economists. Researchers have attempted to explain these disparities in surprising ways, including family economics.
Adding to research in family economics, professor within the Department of Economics and Management, Arnaud Dupuy, and co-author Prof. Simon Weber (University of York) have published a paper entitled “Marriage Market Counterfactuals Using Matching Models” in the journal Economica. This paper seeks to analyse the extent to which the marriage market and in particular the degree of education assortative mating (that is to say the comparison of levels of education between spouses) contributes to rising income inequality.
In the paper, the researchers use a structural matching model to construct marriage markets counterfactuals in order to quantify the contribution of changes in marital patterns in rising income inequality. They propose an algorithm to compute counterfactual marriage patterns that allow the researchers to fully integrate un-married singles and therefore separate differences in marital patterns along both an extensive margin and an intensive margin.
Using the counterfactual marriage patterns obtained, the researchers quantified the contribution of different margins of changes in marital patterns to rising income inequality in the United States between 1962 and 2017. They found that had the rate of marriage remained constant over time, between-household income inequality would have been lower in 2017 by almost 0.03 Gini points*. Therefore, marital patterns can explain around a quarter of the observed increase in income inequality over the period considered.
Most of this effect (93%) comes from the extensive margin, while the intensive margin effect (namely assortative mating in education) has had only a modest impact. The extensive margin, when broken down further shows that it is driven by both a change in the number of singles as well as a change in the distribution of the educational composition among singles.
The researchers conclude that while the sharp increase in the number of singles relative to married people in the past few decades has played a significant role in the increase in income inequality, the over-representation of low-education types among singles in recent years has contributed almost equally to the effect.
*The Gini coefficient is used as a measure of inequality of income or wealth