1. Chapter 3 Marriage and the Family marriage and family trends gains from marriage marriage market marriage and family trends gains from marriage marriage market

2. Why marriage? Eventually over 90% of adults will be married at some point in their lives for women marriage has been  occupation  identity Eventually over 90% of adults will be married at some point in their lives for women marriage has been  occupation  identity

3. family structure has a big influence on economic well-being  U.S. poverty rate overall: 12% for married couples: 5.5% for female-headed households: 26% family structure has a big influence on economic well-being  U.S. poverty rate overall: 12% for married couples: 5.5% for female-headed households: 26%

4. marriage is economic behavior women and men choose  to get married,  when to get married,  who to marry,  to maximize their well-being women and men choose  to get married,  when to get married,  who to marry,  to maximize their well-being

5. a family is a mini-economy production allocation of scarce resources  what to buy with/in budget  use of time production allocation of scarce resources  what to buy with/in budget  use of time

6. I. A look at data marriage households household income marriage households household income

12. cohabitationcohabitation POSSLQ (Census Bureau)  risen from 1% to 7.5% of married couples  10% of adults 25-29 cohabitate same-sex couples  not directly tracked  estimated at most 360,000 HH POSSLQ (Census Bureau)  risen from 1% to 7.5% of married couples  10% of adults 25-29 cohabitate same-sex couples  not directly tracked  estimated at most 360,000 HH

13. 2000 census less than 5% of men and women over 65 have never been married conclusion:  most people expect marriage to make them better off less than 5% of men and women over 65 have never been married conclusion:  most people expect marriage to make them better off

14. Households (HH) in the U.S. 290 million people (2001) 109 million HH  HH is people who occupy same housing unit (house, apt., dorm room)  Family HH includes related people 290 million people (2001) 109 million HH  HH is people who occupy same housing unit (house, apt., dorm room)  Family HH includes related people

20. II. Gains to Marriage specialization principal-agent problem economies of scale risk sharing specialization principal-agent problem economies of scale risk sharing

21. SpecializationSpecialization we observe  men tend to be larger earner in HH (sole earner 22% of HH)  women in HH spend more time on housework, childcare, etc we observe  men tend to be larger earner in HH (sole earner 22% of HH)  women in HH spend more time on housework, childcare, etc

22. example: Ed & Liz choose between market & nonmarket work Liz  $500 week in market work OR  $400 week in nonmarket work OR  something in between choose between market & nonmarket work Liz  $500 week in market work OR  $400 week in nonmarket work OR  something in between

23. Ed  $1000 week in market work OR  $420 week in nonmarket work OR  something in between Ed  $1000 week in market work OR  $420 week in nonmarket work OR  something in between

24. market nonmarket 1000 420 500 400 Ed Liz

25. Ed has absolute advantage in BOTH market & nonmarket work  1000 > 500  420 > 400 why did he marry Liz?  still gains from specializing & sharing output Ed has absolute advantage in BOTH market & nonmarket work  1000 > 500  420 > 400 why did he marry Liz?  still gains from specializing & sharing output

26. comparative advantage Liz is close to Ed in nonmarket production  but way worse in market production  Liz has comp. adv. in nonmarket work gains to specializing Liz is close to Ed in nonmarket production  but way worse in market production  Liz has comp. adv. in nonmarket work gains to specializing

27. case 1: Ed & Liz do not share time divided  60% market work  40% nonmarket work  do not share time divided  60% market work  40% nonmarket work  do not share

28. Liz  $300 in market work  $160 in nonmarket work Ed  $600 in market work  $168 in nonmarket work Liz  $300 in market work  $160 in nonmarket work Ed  $600 in market work  $168 in nonmarket work

29. market nonmarket 1000 420 500 400

30. case 2: Ed & Liz specialize Ed does market work  gives Liz 35% Liz does nonmarket work  gives Ed 50% Ed does market work  gives Liz 35% Liz does nonmarket work  gives Ed 50%

31. resultsresults Ed  produces $1000  gives Liz $350, keeps $650 Liz  produces $400  gives Ed $200, keeps $200 Ed  produces $1000  gives Liz $350, keeps $650 Liz  produces $400  gives Ed $200, keeps $200

32. Ed  $650 market, $200 nonmarket  (case 1: $600, $168) Liz  $350 market, $200 nonmarket  (case 1: $300, $160) Ed  $650 market, $200 nonmarket  (case 1: $600, $168) Liz  $350 market, $200 nonmarket  (case 1: $300, $160)

33. market nonmarket 1000 420 500 400 Liz Ed By specializing, both Ed and Liz do better

34. why does this work? each specialize in what they do best,  relative to their partner Liz specializing in nonmarket work frees Ed to specialize in market work  which he does way better each specialize in what they do best,  relative to their partner Liz specializing in nonmarket work frees Ed to specialize in market work  which he does way better

35. specialization does NOT have to be complete for there to be gains  56% of married households both spouses in labor force specialization does NOT have to be complete for there to be gains  56% of married households both spouses in labor force

36. men have absolute adv. in market work because they earn more  gender earning gap reinforces the gender earnings gap men have absolute adv. in market work because they earn more  gender earning gap reinforces the gender earnings gap

37. notenote if men, women very different in skills  larger gains to specialization if men, women more alike  smaller gains to specialization if men, women very different in skills  larger gains to specialization if men, women more alike  smaller gains to specialization

38. Principal-agentPrincipal-agent someone (principal) hires someone else (agent) to do something problem: agent may not act in best interest of principal someone (principal) hires someone else (agent) to do something problem: agent may not act in best interest of principal

39. exampleexample mechanic does unnecessary repairs babysitter puts kids in front of TV CEO buys $6000 shower curtain cause:  incentive structure  lack of monitoring mechanic does unnecessary repairs babysitter puts kids in front of TV CEO buys $6000 shower curtain cause:  incentive structure  lack of monitoring

40. marriagemarriage incentive:  love, respect, shared goals  care about the other’s utility incentive:  love, respect, shared goals  care about the other’s utility

41. Economies of scale average cost of production falls as production rises  Many HH chores done for 1 person, are just as easy to do for 2 or 3 people average cost of production falls as production rises  Many HH chores done for 1 person, are just as easy to do for 2 or 3 people

42. examplesexamples Cooking for 1 vs. 2  Cleaning, shopping, laundry In HH with more than 1  Less time spent PER PERSON on these tasks  Tasks are shared Cooking for 1 vs. 2  Cleaning, shopping, laundry In HH with more than 1  Less time spent PER PERSON on these tasks  Tasks are shared

43. Buying in bulk Share fixed costs of HH  Furniture  Appliances  Bills (phone, cable…) Buying in bulk Share fixed costs of HH  Furniture  Appliances  Bills (phone, cable…)

44. notenote if HH is really large,  diseconomies of scale as tasks take longer do not need to marry to get economies of scale if HH is really large,  diseconomies of scale as tasks take longer do not need to marry to get economies of scale

45. Risk-sharingRisk-sharing HH with multiple earners less likely to suffer financial distress HH with multiple earners better able to diversify  employers  investments true more for spouses than roommates HH with multiple earners less likely to suffer financial distress HH with multiple earners better able to diversify  employers  investments true more for spouses than roommates

46. III. The Marriage Market notation  Z M = total output of single man  Z F = total output of single woman  Z MF = total output of married HH S F = wife’s share of Z MF wife S M = husband’s share of Z MF = Z MF - S F notation  Z M = total output of single man  Z F = total output of single woman  Z MF = total output of married HH S F = wife’s share of Z MF wife S M = husband’s share of Z MF = Z MF - S F

47. if S M > Z M then man will marry if S F > Z F then woman will marry since most people marry, then usually  Z MF > Z M + Z F if S M > Z M then man will marry if S F > Z F then woman will marry since most people marry, then usually  Z MF > Z M + Z F

48. SupplySupply supply of women willing to marry  how many women will marry at each level of S F  if S F high, a lot of women will want to marry  as S F falls, fewer women will want to marry supply of women willing to marry  how many women will marry at each level of S F  if S F high, a lot of women will want to marry  as S F falls, fewer women will want to marry

49. SFSF # of women Supply max. amount of women

50. DemandDemand demand curve of men for wives  how many men are willing to marry at each level of S F  if S F high, then S M is low, and few men will want to marry  as S F falls, S M rises, so more men will want to marry demand curve of men for wives  how many men are willing to marry at each level of S F  if S F high, then S M is low, and few men will want to marry  as S F falls, S M rises, so more men will want to marry

51. SFSF # of women, men Supply DemandN* SF*SF*

52. comparative statics what happens when  sex ratio changes  women’s wages change  there is a sexual revolution what happens when  sex ratio changes  women’s wages change  there is a sexual revolution

53. change in sex ratio # women per 100 men how?  war  changing birth rates (men marry younger women)  gender preference (China) # women per 100 men how?  war  changing birth rates (men marry younger women)  gender preference (China)

54. rising sex ratio increase in women relative to men supply increases  shifts right increase in women relative to men supply increases  shifts right

55. SFSF # of women, men Supply DemandN* SF*SF* Supply

56. rising female wages increases Z F  women less willing to marry at any given level of S F supply decreases  shift left increases Z F  women less willing to marry at any given level of S F supply decreases  shift left

57. SFSF # of women, men Supply DemandN* SF*SF*

58. sexual revolution contraception makes sex outside of marriage less risky  single well-being increases Z M and Z F increase  women less willing to marry supply decreases  men less willing to marry demand decreases contraception makes sex outside of marriage less risky  single well-being increases Z M and Z F increase  women less willing to marry supply decreases  men less willing to marry demand decreases

59. SFSF # of women, men Supply DemandN* SF*SF*

60. summarizesummarize marriage still popular  but marriages less likely to last  people wait longer to marry gains to marriage from various sources  size of gains affected by differences in skills marriage still popular  but marriages less likely to last  people wait longer to marry gains to marriage from various sources  size of gains affected by differences in skills

61. marriage market  determines position of husband/wife in marriage  determines # of marriages  explains how demographic, labor market, and social changes affects marriage marriage market  determines position of husband/wife in marriage  determines # of marriages  explains how demographic, labor market, and social changes affects marriage

62. looking ahead to Ch. 4 race and family structure marriage and men’s earnings divorce race and family structure marriage and men’s earnings divorce