The Marriage Market and the Education System as Determinants for Social Mobility The Marriage Market and the Education System as Determinants for Social Mobility Roberto Roca Paz G2. Matching and Mating Public Finance Seminar Gender Economics (MW23.4) Friedrich-Schiller-Universität Jena Wirtschaftswissenschaftliche Fakultät Lehrstuhl für Allgemeine volkswirtschaftslehre Prof. Dr. Silke Übelmesser - Severin Weingarten 1

1. Introduction o Focus on income inequality: GINI coefficient. o In order to comprehend the fairness of the distribution of income, it is necessary to understand the forces leading people to their current stand in the distribution scale (Andersen 2009). o Social mobility: the extent to which an individual’s economic [and social] family backgrounds determines his or her future stand in the income distribution. (Equality of opportunity!) o Income inequality and social mobility together provide a better explanation of the income distribution (Andersen 2020). 2

o High income inequality: big income gap between poor and rich people. o High income inequality + low social mobility: very low probabilities of poor people bridging the income gap, despite their efforts or talents. (Most unfair scenario!) o High income inequality + high social mobility: people, independently of their family backgrounds, if they work hard enough, are able to improve their stand in the distribution of income. (The situation is not that serious!) o Achieving income equality should not be the main purpose of public policy: some level of inequality as driving economic growth (see Kuznets 1955). 3

o Policy should shift to trying to achieve higher levels of social mobility. o The literature about social mobility: the education system as it main determinant. the marriage market as a secondary and separate explanatory variable (see Andersen 2001; Andersen 2009; Mercado et al. 2009). Objective: o The education system and the marriage market cannot be considered separately. o The marriage market reinforces the effects that the education system may have on the level of social mobility in the economy. 4

Social mobility and the marriage market depend on the characteristics of the education system: o Innate talents are more important than family backgrounds → High social mobility determined by the education system. o Family backgrounds are more important than innate talents → Low social mobility determined by the education system. Highly educated people: 1) remain longer in the schooling path, 2) have a homogenous group of acquaintances → Increased likelihood of choosing a spouse with similar education levels. (Educational Homogamy!) The marriage market may: o Reinforce the already existing negative effects that the education system has on social mobility. o Lead to the formation of couples with different family backgrounds, thus increasing social mobility. 5

Outline of the presentation o Reviewing the theoretical literature of social mobility and the marriage market. o Connecting theories: what are the effects that the marriage market has on social mobility via the education system? o A country with high income inequality and low social mobility: empirical data and brief description of the education system in Bolivia. o Policy recommendations for Bolivia. 6

2. The Education System: explaining social mobility and the marriage market 7

2. A. The education system as a determinant of social mobility Raut (1996): o Innate talents and education levels of workers lead to the accumulation of knowledge in the economy. o Main assumption: innate talents are distributed independently from family backgrounds. o Optimal education depends both on talents and on family backgrounds. o If the level of education is determined mainly by their family backgrounds →low social mobility. o If the level of education depends more on innate talents → high social mobility. 8

Hassler et al. (1998): o Economy is composed either by workers or entrepreneurs. o Entrepreneurs lead innovation in the economy. o Individuals have different innate assets [intelligence] and social assets [determined by family background]. o Assumption: innate assets are randomly distributed in the population o Which of these assets is more important in determining who will become an entrepreneur? Innate talents [innate assets] are independent from family backgrounds or are distributed randomly in the population! 9

2.B. The marriage market and the education system Men and women tend to choose a spouse with a similar education level (see Fernández et al. 2005; Kremer 1996). Starting point : preferences of individuals for the education achievements of their potential partners.  Focus on the financial traits: o high education levels leading to future higher income (Bruze 2010). o Wealthier individuals would be the most attractive prospective partners for all the population. o They would be everyone’s first choice, and have the privilege of selecting the best candidates of the opposite sex. 10

 Focus on personality traits: o Individuals seek to marry a partner that shares their interests, desired lifestyle, etc. o These traits are correlated with formal education (Bruze 2010). o Wealthier individuals are not necessarily the most attractive prospective partner for all the population o Educational homogamy still prevails! 11

Regardless of the preferences: o An average individual is not able to know all the population: limited set of acquaintances through the course of the lifetime. o Set of acquaintances: who compose it now and who will become a part of it in the future? o People choose a partner from their social circles.(Under constraints of incomplete information and uncertainty!) Characteristics of the search process (Blossfeld et al. 2003) : 1)Prospective partners are appearing in a random order 2)Coming from a population with unknown parameters 3)There are search costs 4)Difficulty of backtracking to previously rejected candidates (Already found another partner or due to emotional considerations like pride and resentment). 12

Decision making becomes increasingly difficult and an optimal choice is hard to reach. Simon’s (1956) concept of satisfacing: o Taking into account the costs of gathering more information, agents choose trough a set of alternatives until a sufficiently good enough option is met. Applying satisficing to the marriage market: o Individuals choose a spouse from a set of alternatives which are encountered sequentially and without knowing about the characteristics of possible partners beforehand (Simon 1999). o There is no optimal solution for when to stop looking for prospective marriage partners and settle down with a particular one (Blossfeld et al. 2003). o Social networks become increasingly important: within this group of people is that “good enough” partner with which they will ultimately decide to settle down. 13

The transition period between the ending of education and entry into the labor market: assuming adult roles and begin to think about settling down (Blossfeld et al. 2003). When does this transition occurs in the life cycle of the individual? Determined by the institutional structures of the schooling system (Shavit et al. 1993): o The education system imposes a series of selection barriers for young people inside the schooling path. o At every new selection barrier, a proportion of young adults fail to move forward and achieve a higher education level. o This process depends on the number of aspiring candidates, and the number of available places in the new level, which tends to be smaller. 14

o Those who fail to move forward to higher selection barriers enter the labor market at an earlier age than those who are still studying. o Formation of ever increasingly homogeneous groups with rising age. o The probability of the developing of friendship depends on the different social contact opportunities. o Increased likelihood of establishing friendships and romantic relations that may eventually lead to marriage with a partner with a similar education level: “due to the mere fact that one has continued together in the educational system” (Blossfeld et al. 2003, p. 21). 15

3. The Marriage Market and Family Backgrounds 16

Selection barriers of the schooling system: o Explicitly refers to the quantity of young adults moving forward. o Implicitly signals who are these young students: those with the best aptitudes, innate talents or innate assets. Educational barriers: social allocation of the available places in each hurdle. Social origin of the candidates !(Shavit et al. 1993). Those attaining higher education levels are not necessarily those who have the corresponding innate talents. Importance of family backgrounds or social origin! Social origin (Blossfeld et al. 2003): o Characteristics of the parents (wealth, level of education, prestige, etc.) o Determination of a first social network (friends, relatives and acquaintances) o Family backgrounds as a barrier between social circles Higher levels of parent’s education → Higher rates of education homogamy of their children 17

o Family backgrounds or social assets are more important than the innate talents or intelligence o Only people with advantageous family backgrounds will overcome the different barriers of the education system (and eventually get higher remunerated jobs). Consequence → Low social Mobility! o Only advantaged ones have access to higher educational levels. o Remain together longer in the schooling path. o Increasing likelihood of choosing a partner from their homogenous social network. Higher educational homogamy! Consequence → Even lower social Mobility! The educational system not only is a determinant of social mobility; but also the characteristics of the marriage market reinforce the negative effects that the education system may already have on social mobility. 18

The education system: efficient allocation of individuals in the schooling path. Those with the required innate talents will move forward (regardless of what family backgrounds). Consequence → High social mobility! Further assumption: innate talents of individuals are distributed independently from their family backgrounds and that innate assets are randomly distributed across the population. o Young people moving forward in the schooling path come from different family backgrounds. o They stay longer in the educational system o Increased likelihood of choosing a spouse from their newly acquired social networks. 19

Educational homogamy remains, but: o Individuals from advantageous family backgrounds may choose spouses from disadvantageous ones. o Both partners’ economic and socio-cultural resources are then pooled together and cumulated (Mayer 1977, cited in Blossfeld et al. 2003) Consequence → Higer Social Mobility! Obtaining a higher education level than of the parents: o Access to new social networks via school. o Preference for partners with the same education, o Secure higher social status through a homogamous marriage. Upwardly mobile young students also retain the networks from their social origin.: o They may choose a partner from the social network of their origin and marry downwardly. No educational homogamy! Via schooling and marriage: two people end up being able to cross the income gap → Even higher social mobility! 20

4. Empirical data and description of the education system in Bolivia 21

In Bolivia there is high income inequality and low social mobility. The most unfair scenario in the income distribution! In 2011: o 45% of the population fell below the poverty rate. o 20.9% was extremely poor (UDAPE). Average poverty and extreme poverty incidence in the same year for the region were 29.4% and 11.5% respectively. In Latin-America there is an overall high income inequality (CEPAL 2012): o The wealthier 10% of the population concentrate around 32% of the income. o The poorest 40% get only 15% of the total income. o Bolivia presents the 8th highest income inequality 22

Andersen (2002) finds social mobility indexes 18 countries of Latin-American and the Caribbean: o Bolivia situated as the country with the third lowest social mobility. The social mobility index: o Based on the education gaps: the difference between the years of schooling a young person should have, and the years of schooling he or she actually has. o A series of explanatory variables for the educational gap are considered: o If this gap is mostly explained by variables that could be categorized as family background (the level of parental education or the income level of the parents) Consequence → Low social mobility! Educational attainment of young people does not depend on the innate talents of individuals, which are assumed to be randomly distributed across the population. 23

o Primary and secondary education is offered by private and public institutions. o Focus on students from public institutions: assumed to have disadvantageous family backgrounds. o Determining if the structure of the education system imposes on them certain barriers to move forward in the schooling path. o The main barrier imposed by the schooling system is the low quality of the education in public institutions.  Quality of education and expected returns: The quality of the education received by children in public schools in Bolivia is very low compared to the private schools, and its return on education is too low especially at the primary and secondary levels (Andersen et al. 2003). 24

 Quality of education and its usefulness: o This conception of quality of education can be measured through standardized testing. o Unfortunately, Bolivia does not have a functioning program that performs this type of testing. o Nonetheless, there is some information available that -although outdated- helps to provide a general idea of the state of quality of education. o The data consistently show that students from private schools perform better in these standardized tests (see POPULI 2010). 25

Low quality of education leads to students leaving the schooling system at earlier stages. Analyzing the university system in Bolivia: o The focus on public universities, assuming that their students would have disadvantageous family backgrounds. Data from the National Institute of Statistics INE (2002, as cited on POPULI 2007) show: o 84 % of the population with public higher education belong to the wealthiest two quintiles o Only 1.4 % of people with college education belong to the poorest quintile of Bolivia. For low income young students -even when they don’t have to face costs of matriculation and other education fees- there are structural barriers in the educational system that does not allow them access to the highest levels of the schooling path 26

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5. Conclusions and Policy Recommendations 28

To increase the level of social mobility in Bolivia: o Reform the structure of the education system: innate talents and not so much familiars antecedents, determining who go far in the schooling path. o Focus on improving the quality of education imparted in public schools o Increase expected returns to education: students with disadvantageous family backgrounds do not decide the leave the educational system early. According Psacharapoulos (1985, as cited in POPULI 2010), the quality of public education is largely determined by the implementation of control and evaluation mechanisms of student academic performance. Implementation of standardized tests: o Would allow for tracking of those educational institutions imparting the best and the worse quality of education. o The results of these tests should thus be public. o Serving as a signaling mechanism for parents about the quality of education. 29

Improvements in student academic performance are determined in 67% by the quality of education given by teachers (Criales 2005, as cited in POPULI 2010). o Make a revision of the salary structure of teachers in public educational institutions. Regarding educational public spending: o Redirect some founds from the public university system into the primary and secondary public education. o Establish systems of public grants and student loans, allowing for more low income talented students to remain inside the schooling path and master the following education barriers. o Incentivize the participation of the private sector by offering tax reliefs for institutions that finance educational improvement initiatives. 30

Public policy cannot do much to –directly- change the prevailing marriage patterns in the society but, through the policy recommendations mentioned above, it may increase the likelihood of the formation of marriages composed by spouses from different family backgrounds; thus reinforcing the positive effects on social mobility those policy recommendations may already have. 31

References. Andersen, Likke (2001). “Social Mobility in Latin America: Links with Adolescent Schooling.” Inter-American Development Bank, Research Network Working Paper No. R-433. Andersen, Likke (2002). “Baja Movilidad Social en Bolivia: Causas y Consecuencias para el Desarrollo.” Instituto de Investigaciones Socio Económicas. Documento de trabajo No. 02/02. Andersen, Likke and Wiebelt, Manfred (2003). “La Mala Calidad en la Educación en Bolivia y sus consecuencias para el Desarrollo” Universidad Católica Boliviana “San Pablo” Instituto de Investigaciones Socio Económicas DT 02/03. La Paz, Bolivia. Andersen, Likke (2009). “Social Mobility in Bolivia is Finally Improving!” Institute for Advanced Development Studies. Development Research Working Paper Series No. 16/2009. Blossfeld, Hans Peter, and Andreas Timm (2003). “Who Marries Whom? Educational Systems as Marriage Markets in Modern Societies.” Dordrecht: Kluwer. Bruze, Gustaf (2010). “Marriage Choice of Movie Stars: Does Spouses’ Education Matter?”. Journal of Human Capital 5, pp. 1–28. CEPAL (2012). “Panorama social de America Latina.” Documento informativo Hassler, J. y Mora, J.V. (1998). “IQ, Social Mobility and Growth.” Institute for International Economic Studies, Stockholm University, Seminar Papers No. 635, Enero. 32

Kremer, M. (1996). “How Much Does Sorting Increase Inequality?” NBER Working Paper No. 5566,Mayo. Kuznets, S. (1955). “Economic Growth and Income Inequality.” American Economic Review. Vol. 45. No 1. pp Mercado, A. y Leitón-Quiroga, J. (2009). “The Dynamics of Poverty in Bolivia.” Instituto de Investigaciones Socio Económicas. Documento de trabajo No. 02/09. POPULI (2007). “Desigualdad: Reflexiones para el Debate.” Asunto Público N° 30, 19 de Febrero de POPULI (2010). “Una Nueva Ley y el Viejo Problema: La Calidad en la Educación Pública un Asunto Olvidado.” Asunto Público N° 108 – Noviembre de 2010 Raut, L.K. (1996). “Signalling Equilibrium, Intergenerational Mobility and Long-Run Growth.” University of Hawaii-Manoa, Draft, Febrero. Shavit, Y. and H.-P. Blossfeld (1993). “Persistent inequality. Changing educational stratification in thirteen countries.” Boulder (CO): Westview Press. Simon, H.A. (1956) “Rational choice and the structure of environments.” Psychological Review, 63: Simon, H.A (1999) “Invariants of human behavior. ‟ Annual Review of Psychology, 41:1-19. UDAPE (2010) “Dossier de estadísticas sociales y económicas.” April 26th

Thank you. 34