Working Paper: CEPR ID: DP5099
Authors: Alison L. Booth; Melvyn G. Coles
Abstract: Societies are characterized by customs governing the allocation of non-market goods such as marital partnerships. We explore how such customs affect the educational investment decisions of young singles and the subsequent joint labour supply decisions of partnered couples. We consider two separate matching paradigms for agents with heterogeneous abilities - one where partners marry for money and the other where partners marry for romantic reasons orthogonal to productivity or debt. These generate different investment incentives and therefore have a real impact on the market economy. While marrying for money generates greater investment efficiency, romantic matching generates greater allocative efficiency, since more high ability individuals participate in the labour market. The analysis offers the possibility of explaining cross-country differences in educational investments and labour force participation based on matching regimes.
Keywords: Cohabitation; Education; Marriage; Matching; Participation
JEL Codes: I21; J12; J16; J41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Marrying for money (J12) | Efficient educational investments (I21) |
| Efficient educational investments (I21) | Increased labor market participation (J49) |
| Romantic matching (C78) | Allocative inefficiencies (D61) |
| Allocative inefficiencies (D61) | Low returns to education (I26) |
| Low returns to education (I26) | Fewer individuals investing in education (I21) |
| Fewer individuals investing in education (I21) | Negative impact on labor market participation (F66) |
| Marrying for money (J12) | Higher participation rate of high-ability individuals in the labor market (J49) |
| Higher participation rate of high-ability individuals in the labor market (J49) | Enhanced overall productivity (O49) |