Essays in economics of the family: incorporating cohabitation

Thesis (Ph. D.)--University of Washington, 2005.The first essay of this dissertation provides new evidence on wage premiums for men in relation to marriage and cohabitation. Using data from the National Longitudinal Survey of Youth 1979 (NLSY79), we show that even after accounting for selection there is a cohabitation wage premium, albeit smaller than the marriage premium, for white and black men but not for Hispanic men. We find empirical support for a joint human capital hypothesis which suggests that intra-household spillover effects of partner's education can explain the existence of the wage premiums.A recent strand of literature in demography argues that young unmarried Americans value marriage so highly that it is perceived as a family status to be chosen after certain economic preconditions are fulfilled---after they have achieved the so-called "white picket fence dream" (a house, surplus income etc.). Motivated by these claims, in the second essay we use data from the NLSY79 to examine whether there is any direct relationship between the individual's housing and financial assets and his/her transition into marriage or cohabitation. For both men and women, analysis using a proportional hazard model indicates a positive association of asset ownership with transition into marriage, but not with transition into cohabitation. However, instrumental variables probit estimations, designed to account for the endogeneity of asset-accumulation, either remove the statistical significance of the association between asset ownership and family union transitions, or identify effects that are in the opposite direction to those derived from the time-to-event analysis, indicating dissuading effects of asset ownership on transition to marriage.The existing theoretical literature on household decision-making makes no distinction between different institutional processes of household formation, namely, cohabitation and marriage. In the third essay, we develop a simple two-period model of family union that distinguishes cohabitation and marriage. The analytical results of the model suggest that compared to marital unions, cohabiting unions have higher risk of dissolution in the future, and involve less intra-household specialization. The model also indicates that improved labor market conditions for men provide stronger incentives for marriage than for cohabitation; and that cost of divorce affects married women's labor supply choice