TY  - JOUR
AU  - Fernandez,Raquel
AU  - Guner,Nezih
AU  - Knowles,John
TI  - Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8580
PY  - 2001
Y2  - November 2001
UR  - http://www.nber.org/papers/w8580
L1  - http://www.nber.org/papers/w8580.pdf
N1  - Author contact info:
Raquel Fernández
Department of Economics
New York University
19 West 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8908
Fax: 212/995-4186
E-Mail: raquel.fernandez@nyu.edu

Nezih Guner
MOVE
Facultat d’Economia
Edifici B – Campus de Bellaterra
08193 Bellaterra
Cerdanyola del Vallès
Spain
E-Mail: nezih.guner@movebarcelona.eu

John Knowles
Department of Economics
University of Pennsylvania
Philadelphia, PA  19104-6297
E-Mail: jknowles@econ.upenn.edu
AB  - This paper examines the interactions between household matching, inequality, and per capita income. We develop a model in which agents decide whether to become skilled or unskilled, form households, consume and have children. We show that the equilibrium sorting of spouses by skill type (their correlation in education) is increasing as a function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting, wage inequality, and fertility differentials are positively correlated across steady states and negatively correlated with per capita income. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses' education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables.
ER  -