Technology and the Changing Family: A Unified Theory of Marriage, Divorce, Educational Attainment and Married Female Labor-Force Participation with Jeremy Greenwood, Georgi Kocharkov and Cezar Santos, January 2015.
Marriage has declined since 1960, with the drop being bigger for non-college educated individuals versus college educated ones. Divorce has increased, more so for the non-college educated. Additionally, positive assortative mating has risen. Income inequality among households has also widened. A unified model of marriage, divorce, educational attainment and married female labor-force participation is developed and estimated to fit the postwar U.S. data. Two underlying driving forces are considered: technological progress in the household sector and shifts in the wage structure. The analysis emphasizes the joint role that educational attainment, married female labor-force participation, and assortative mating play in determining income inequality.
Does Marriage Make You Healthier? with Yuliya Kulikova and Joan Llull, December 2014.
We use the Panel Study of Income Dynamics (PSID) and the Medical Expenditure Panel Survey (MEPS) to study the relationship between marriage and health for working-age (20 to 64) individuals. In both data sets married agents are healthier than unmarried ones, and the health gap between married and unmarried agents widens by age. After controlling for observables, a gap of about 12 percentage points in self-reported health persists for ages 55-59. We estimate the marriage health gap nonparametrically as a function of age. If we allow for unobserved heterogeneity in innate permanent health, potentially correlated with timing and likelihood of marriage, we find that the effect of marriage on health disappears at younger (20-39) ages, while about 6 percentage points difference between married and unmarried individuals, about half of the total gap, remains at older (55-59) ages. These results indicate that association between marriage and health is mainly driven by selection into marriage at younger ages, while there might be a protective effect of marriage at older ages. We analyze how selection and protective effects of marriage show up in the data.
Optimal Spatial Taxation: Are Big Cities Too Small? with Jan Eeckhout, December 2014.
We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes for cities of different sizes. The optimal tax schedule is location specific and tax differences between large and small cities depends on the level of government spending and on the concentration of housing wealth. Our estimates for the US implies higher marginal rates in big cities, but lower than what is observed. Simulating the US economy under the optimal tax schedule, there are large effects on population mobility: the fraction of population in the 5 largest cities grows by 8.0% with 3.5% of the country-wide population moving to bigger cities. The welfare gains however are smaller. Aggregate consumption goes up by 1.53%. This is due to the fact that much of the output gains are spent on the increased costs of housing construction in bigger cities. Aggregate housing consumption goes down by 1.75%.
Heterogeneity and Government Revenues: Higher Taxes at the Top? with Martin Lopez Daneri and Gustavo Ventura, July 2014
We evaluate the effectiveness of a more progressive tax scheme in raising government revenues. We develop a life-cycle economy with heterogeneity and endogenous labor supply. Households face a progressive income tax schedule, mimicking the Federal Income tax, and flat-rate taxes that capture payroll, state and local taxes and the corporate income tax. We parameterize this model to reproduce aggregate and crosssectional observations for the U.S. economy, including the shares of labor income for top earners. We find that a tilt of the Federal income tax schedule towards high earners leads to small increases in revenues which are maximized at an effective marginal tax rate of about 36.9% for the richest 5% of households – in contrast to a 21.7% marginal rate in the benchmark economy. Maximized revenue from Federal income taxes is only 8.4% higher than it is in the benchmark economy, while revenues from all sources increase only by about 1.6%. The room for higher revenues from more progressive taxes is even lower when average taxes are higher to start with. We conclude that these policy recommendations are misguided if the aim is to exclusively raise government revenue.
Childcare Subsidies and Household Labor Supply with Remzi Kaygusuz and Gustavo Ventura, June 2014
What would be the aggregate effects of adopting a more generous and universal childcare subsidy program in the U.S.? We answer this question in a life-cycle equilibrium model with joint labor-supply decisions of married households along extensive and intensive margins, heterogeneity in terms of the presence of children across households and skill losses of females associated to non participation. We find that subsidies have substantial effects on female labor supply, that are largest at the bottom of the skill distribution. Fully subsidized childcare available to all households leads to long-run increases in the participation of married females and total hours worked by about 10.1% and 1.0%, respectively. There are large differences across households in welfare gains, as a small number of households - poorer households with children - gain significantly while others lose. Welfare gains of newborn households amount to 1.9%. Our findings are robust to differences among households in fertility and childcare expenditures.
Marital Instability and the Distribution of Wealth, with John Knowles, July 2007.
The levels of wealth differ significantly among people who are approaching their retirement both by current marital status as well as by marital histories. We develop an equilibrium model of marriage and divorce and household savings, in which the interplay between endogenous formation and dissolution of families and savings decisions plays a key role. We show that a calibrated version of the model can reproduce observed patterns of wealth inequality by marital status and marital history, and highlight the role of endogenous marriage formation in wealth accumulation.
An Economic Analysis of Family Structure: Inheritance Rules and Marriage Systems, manuscript (first version November 1998). Updated version coming soon.
Traditional societies had norms governing the choice of mates and rules for determining inheritances. The goal here is to analyze how different inheritance rules and marriage systems are determined. To do this, an overlapping generations model of an agrarian economy is constructed. On the one hand, a young adult’s prospects on the marriage market depend upon the inheritance he or she will receive from their parents. The size of the inheritance is a function of who the children marry. On the other hand, parents depend upon their children to support them in old age. In the analysis, the size of inheritance and the level of old age support are determined as a result of a multilateral bargaining process between parents and their children. Assortative mating, patrilineal inheritance rules and polygamy emerge naturally out of the model.