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We document new facts on the distributions of male wages, male earnings, and household earnings and income (before and after taxes) in the Netherlands and the United States. We find that, in both countries, wages display rich dynamics, including substantial asymmetries and nonlinearities by age and previous earnings levels. Individual-level male wage and earnings risk is relatively high for younger and older people, and for those in the lower and upper parts of the income distribution. In the Netherlands, the behavior of hours and family labor supply have noticeable effects on earnings persistence and on the skewness and kurtosis of wage changes, but government transfers are a major source of insurance. Instead, the role of family insurance is much larger in the U.S. and also affects the standard deviation of wage changes, in addition to its skewness and kurtosis, and wage persistence. Family and government insurance reduce, but do not eliminate these non-linearities in household disposable income by age and previous earnings in both countries.

for helpful comments and suggestions. We are grateful to Moritz Kuhn for providing us with additional statistics from the Survey on Consumer Finances data set. The views expressed herein are those of the authors and do not necessarily reflect the views of the CEPR, the National Bureau of Economic Research, or the Federal Reserve Bank of Minneapolis. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

In this paper we derive an explicit model of negotiations between spouses when unconstrained transfers are possible only in case of separation. We show that inefficient separation may occur in equilibrium even under consensual divorce law. This provides theoretical support for the view that changes in social norms rather than in legislation may be responsible for increasing divorce rates. (JEL: C78, J120)

In this paper we ask whether policies targeting a reduction in crime rates through changes in education outcomes can be considered an effective and cost-viable alternative to interventions based on harsher punishment alone. In particular we study the effect of subsidizing high school completion. Most econometric studies of the impact of crime policies ignore equilibrium effects and are often reduced-form. This paper provides a framework within which to study the equilibrium impact of alternative policies. We develop an overlapping generation, life-cycle model with endogenous education and crime choices. Education and crime depend on different dimensions of heterogeneity, which takes the form of differences in innate ability and wealth at birth as well as employment shocks. PSID, NIPA and CPS data are used to estimate the parameters of a production function with different types of human capital and to approximate a distribution of permanent heterogeneity. These estimates are used to pin down some of the model's parameters. The model is calibrated to match education enrolments, aggregate (property) crime rate and some features of the wealth distribution. In our numerical experiments we find that policies targeting crime reduction through increases in high school graduation rates are more cost-effective than simple incapacitation policies. Furthermore, the cost-effectiveness of high school subsidies increases significantly if they are targeted at the wealth poor. We also find that financial incentives to high school graduation have radically different implications in general and partial equilibrium (i.e. the scale of the programmes can substantially change its outcomes).

for helpful comments and suggestions. We are grateful to Moritz Kuhn for providing us with additional statistics from the Survey on Consumer Finances data set. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research, any agency of the Federal Government, or the Federal Reserve Bank of Chicago. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.