We use a simple structural matching model with unobserved heterogeneity to produce counterfactual marriage patterns, and thus quantify the contribution of changes in marital patterns in rising income inequality. We propose an algorithm that allows us to fix the degree of assortative mating without changing the level of marital gains and hence isolate the intensive and extensive margins (i.e. isolate changes in assortative mating from changes in marriage rates). We apply this approach to US data from 1962 to 2017, and show that marital patterns can explain about a quarter of the rise in income inequality, the intensive margin contributing 7%, the extensive margin the remaining 93%. Our algorithm also allows us to show that the extensive margin is itself driven for three-fifths by a change in the total number of singles and for two-fifths by a change in the distribution of types among singles (in particular low-educated women).
|Number of pages||15|
|Publication status||E-pub ahead of print - 28 Jul 2021|