Education in a Marriage Market Model Without Commitment

Abstract

This paper develops a model that combines intrahousehold bargaining with competition on the marriage market to analyse women's and men's incentives to invest in education. Once married, spouses bargain over their share of total household income. They have the option of unilateral divorce and subsequent remarriage. Through this channel, the marriage market situation (the quality of prospective spouses and the distribution of resources in other couples) influences the distribution within existing couples. Individuals differ in their educational attainment, and more educated individuals contribute more to household income. I use this model to study the impact of changes in wage inequality and the rates of educational attainment of men and women on intrahousehold distribution. An interesting development of the last decade in western countries is women overtaking men in terms of higher education. Within the context of my model, an increase of women's participation in higher education over and above men's university graduation rates benefits men without degrees; educated men, however, are not able to translate the increase in educated women on the marriage market into a significantly larger share of household income. Hence, men's incentive to invest in education decreases if more women become educated. Even without assuming any heterogeneity in tastes between men and women, equilibria arise in which men and women decide to become educated at different rates.

Do Marriage Markets Influence the Divorce Hazard?

“…For ease of comparison I also include my base estimates, omitting the socio-economic controls that are the same as above. Consistent with the theoretical model I developed in Hyee (2011), the coefficient associated with the male education premium is not significant when the interactions are dropped -the effect indeed only affects women who have a chance to marry a college educated man in a second marriage. As a measure of overall wage inequality, I use the standard deviation of hourly wages for the marriage market relevant subgroup of men aged 18-50.…”

“…If there is considerable wage inequality between college graduates and non-graduates, however, divorcing a less educated mate in the hopes of making a better match on the marriage market becomes a more interesting option. Although I do not directly test the model I propose in Hyee (2011), it provides crucial theoretical insight into the relationship between (income-) heterogeneity on the marriage market and the divorce hazard that is the basis of this empirical work: it has the empirical implication, that, other things equal, the overall divorce rate could increase with the education premium (especially if the education premium is already relatively high).…”

“…I make this point more formally in Hyee (2011). In this paper, I develop a model of the marriage market, were couples randomly meet and bargain over their individual consumption level once married.…”

“…The first term of equation (1) measures the direct effect of the level of wage inequality on the divorce hazard, while the second term measures whether this effect varies across educational groups. The theoretical prediction of the model I develop in Hyee (2011) is that the effect of changes in the male wage premium on the divorce hazard should be stronger for couples in which at least one partner is not a college graduate (because women married to college graduates cannot improve on the education of their spouse on the marriage market). It would therefore support my hypothesis if there was little or no overall effect of the male education premium, but if the effect only worked through the interactions with the education dummies.…”