CAGE Work in Progress

Title: The Effect of Economic Inequality on Assortative Matching: The Formation and Dissolution of Marriages

 Ran Abramitzky,[1] Netanel Ben-Porath,[2] and Victor Lavy.[3]

[1]Stanford University and the NBER.

[2] Northwestern University.

[3] Warwick University, The Hebrew University, NBER, and CEPR.

Abstract - The increase in assortative matching in marriage markets observed across many nations worldwide is a contributing factor to rising income inequality. This paper suggests that the causal chain also runs in reverse: deepening labor market inequality could trigger greater assortative matching in the marriage market. To establish causality, we study the Israeli kibbutzim that transitioned from equal sharing to market economies. A reform that followed a staggered adoption pattern across kibbutzim abolished egalitarian income sharing, generating inequalities by linking wages to education for the first time. This enabled us to conduct a series of difference-in-differences analyses to examine the impact of the reform on divorce and marriage patterns. First, we find that the rise in economic inequality led to divorce among couples with unequal education, but only when the wife was more educated than the husband. This finding is consistent with a violation of the norm that dictates the husband should be the primary breadwinner. Second, we find that the reform increased assortative matching in education, resulting in a significant reduction in educational differences among newly married couples. Importantly, we find that assortative matching existed in the kibbutzim even before liberalization, when earnings were not related to education. This suggests that assortative matching on education is driven not only by income but also by a preference for marrying a partner who is similarly educated. Overall, we conclude that assortative matching increased following the reform, both through the formation of new marriages and the selection of spouses, as well as the dissolution of existing marriages. These results demonstrate that increased labor-market inequality may increase inter-household inequality by boosting assortative matching in the marriage market.

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