How Do Marital Status, Labor Supply, and Wage Rates Interact? A Dynamic Analysis of Men Through Their Late 30s

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 05.07.2005, 12:15 - 13:30


Presentation by 

Robert I. Lerman (Urban Institute)
Avner Ahituv (University of Haifa)


The interactions between marital status and labor force outcomes are complex and dynamic. Although the association between marriage and earnings is highly positive, questions arise about causation and about the possibility that unmeasured personal attributes, such as good looks, a positive outlook and a sense of humor, might increase success both in marriage and in the job market. We jointly estimate the interactions between wage rates, hours worked, and marital flows in a dynamic context using methods that control for both selectivity and simultaneity. Unlike hazard models that use only person-years up to the entry into a marital status, we follow individuals in ways that take account of the entire sequence of marital status flows. Our findings reveal statistically significant, causal impacts running from marriage to working hours and then to wage rates, from working hours to subsequent wages, and from both wage rates and working hours to marital status. To capture the long-term changes in earnings and marital status implied by these results, we simulate how exogenous changes in the utility from marriage, in wage rates, and in working hours would alter the pathways of young men. The estimates indicate that staying married raises earnings by about 24 percent relative to remaining single and by about 17 percent relative to continuing in a divorced state. These marriage effects are more than double the returns to an additional year of schooling.

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