Trends in Earnings Inequality and Earnings Instability among U.S. Couples: How Important is Assortative Matching?∗

We examine changes in inequality and instability of the combined earnings of married couples over the 1980–2005 period using two U.S. panel data sets: Social Security earn-ings data matched to Survey of Income and Program Participation panels (SIPP-SSA) and the Panel Study of Income Dynamics. Relative to male earnings inequality, the variance of couples ’ earnings is both lower in levels and rises by a smaller amount. We also find that couples ’ earnings instability is lower in levels compared to male earnings instability and actually declines in the SIPP-SSA data. While wives ’ earnings played an important role in dampening the rise in inequality and year-to-year variation in resources at the family level, we find that marital sorting and coordination of labor supply decisions at the family level played a minor role. Comparing actual couples to randomly paired simulated couples, we find very similar trends in earnings inequality and instability