Some macroeconomics for family economics: Two essays

One of the most striking changes in American society in the last forty years has been the decline and delay in marriage. The fraction of young men and women who have never been married increased significantly between 1970 and 2000. Idiosyncratic labor income volatility also increased over the same period. This first chapter of this dissertation establishes a quantitatively important link between these two facts. Specifically, if marriage involves consumption commitments, then a rise in income volatility results in a delay in marriage. Marriage, however, also allows for diversification of income risk since earnings fluctuations between spouses need not be perfectly correlated. The hypothesis that rising income volatility contributed to the delay in marriage is assessed vis-à-vis other explanations in the literature, using an estimated equilibrium search model of the marriage market. The results show that the increase in volatility accounts for about one-third of the observed delay in marriage. That is, the effects of consumption commitments due to increased income volatility outweigh the effects of the insurance gains provided by spouses. Marriage has declined since 1960, with the drop being bigger for non-college educated individuals versus college educated ones. Divorce has increased, more so for the non-college educated vis-à-vis the college educated. Additionally, assortative mating has risen; i.e., people are more likely to marry someone of the same educational level today than in the past. A unified model of marriage, divorce, educational attainment and married female labor-force participation is developed in the second chapter. The model is estimated to fit the postwar U.S. data. The role of technological progress in the household sector and shifts in the wage structure for explaining these facts is gauged