Working Paper: NBER ID: w14773
Authors: Tara Watson; Sara McLanahan
Abstract: In this paper we investigate the effect of relative income on marital status. We develop an identity model based on Akerlof and Kranton (2000) and apply it to the marriage decision. The empirical evidence is consistent with the idea that people are more likely to marry when their incomes approach a financial level associated with idealized norms of marriage. We hypothesize that the "marriage ideal" is determined by the median income in an individual's local reference group. After controlling flexibly for the absolute level of income and a number of other factors, the ratio between a man's income and the marriage ideal is a strong predictor of marital status -- but only if he is below the ideal. For white men, relative income considerations jointly drive co-residence, marriage, and fatherhood decisions. For black men, relative income affects the marriage decision only, and relative income is tied to marital status even for those living with a partner and children. Relative income concerns explain 10-15 percent of the decline in marriage since 1970 for low income white men, and account for more than half of the persistent marriage gap between high- and low-income men.
Keywords: No keywords provided
JEL Codes: J12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relative income (D31) | likelihood of marriage (J12) |
| income approaching marriage ideal (J12) | likelihood of marriage (J12) |
| ratio of man's income to marriage ideal (J12) | marital status (J12) |
| relative income (D31) | cohabitation decisions (J12) |
| relative income (D31) | fatherhood decisions (J12) |
| relative income (black men) (D31) | marriage decisions (J12) |
| low income (I32) | likelihood of marriage (J12) |
| relative income considerations (D31) | decline in marriage rates (J12) |