New research shows that the matching of similar people in the marriage market – ‘positive sorting’ – is linked to a similar process of sorting in the labour market through households' labour supply choices. This interplay shapes inequality.
The authors find that a 10.6% reduction in spousal differences in hours worked at home is associated with a 42% increase in marriage sorting and an improvement in labour market sorting for women of 1.2%. These equilibrium effects have an impact on gender inequality in important ways: the gender gap in labour market sorting falls by 20% and the gender wage gap by 11%.
Salient relationship between marriage and labour in the data
The researchers use detailed household and occupation level data from Germany to show that marriage and labour market sorting are tightly related, as illustrated in Figure 1. Panel A shows that those who marry someone with similar education are better matched to their employers.
Figure 1 also illustrates that hours serve as the link between sorting in both markets. Panel B indicates that spousal correlation in hours is more pronounced when marriage sorting is stronger. Meanwhile, Panel C shows that hours are linked to labour market sorting: even though men are better matched to their employers than women, when working the same number of hour this gap decreases substantially.
A framework to reconcile the data and rethink gender inequality
Sourcing on these facts, the authors build a novel, unified framework that links labour and marriage market sorting. In their equilibrium model, individuals simultaneously choose who to marry, how to allocate their time between work at home and in the market, and which job to work in.
They show that the nature of home technology shapes the equilibrium. When the technology is such that spouses' hours at home complement each other (for example, because children may perform better if both parents invest time in them), individuals with similar education are more attracted to each other and those who marry find it more beneficial to split their time more equally.
As a result, the gender gap in hours worked declines and women and men with the same skills work for similarly productive firms, helping to close the gap in labour market sorting and pay. The model estimation identifies a strong complementarity in spouses' hours, consistent with the data (see Figure 1, Panel B).
Novel policy implications
The authors put their estimated model to work to inform policy designs. Figure 2 summarises their main results.
The horizontal axis displays the strength of complementarities in home hours, which is higher the more negative the parameter. A simulation that increases home hours complementarities from the estimate of -0.53 to -1.5 (equivalent to the technological difference between West and East Germany) leads to a 48% increase in marriage market sorting (Panel A).
In the new equilibrium, couples reduce their differences in home time by 10.6% (Panel B). This contributes to a reduction of 20% in the gender gap in labour market sorting (Panel C), closing the gender wage gap by 11% (Panel D).
The study further quantifies the consequences of overlooking sorting. Ignoring the existence of positive sorting in the marriage market, the study would overestimate the gender wage gap by 0.83%. Assuming random labour market sorting, the study would underestimate the gender wage gap by 9.45%, highlighting the key (and opposing) role that marriage and labour market sorting play for gender inequality.
New avenue for future research
To conclude, the research opens a novel agenda that considers the interaction of the marriage and the labour markets, together with families' time allocation choices, to explain gender gaps in labour market outcomes.
The main contribution is to demonstrate the significant roles of labour market and marriage market sorting as amplifying or mitigating forces behind policy changes. Failing to account for the interactions between the two markets hinders understanding of how to reduce gender inequality.
References
Calvo, P., Lindenlaub, I, and Reynoso, A., 2020. Marriage Market and Labour Market Sorting. Unpublished manuscript.
Contact details:
Ana Reynoso
Website: https://sites.lsa.umich.edu/ana-reynoso/
Contact: ana.reynoso@umich.edu
