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Lookup NU author(s): Dr Roberto Bonilla Trejos
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I analyse an economy where a search labour market with an endogenous wage distribution and a matching marriage market interact. The economy is populated by homogeneous workers, firms and marriage partners (MPs). Workers simultaneously search for firms in order to work and for MPs in order to marry. Firms post wages to attract workers. MPs look for workers in order to marry. Married workers receive a pre-determined flow utility, and married MPs derive flow utility equal to the worker's earnings. This provides the link between the markets. I show that the so called married wage premium can arise purely from frictions in both markets. In one equilibrium, MPs marry only high earners, while workers accept wages that render them "unmarriageable". A two way equilibrium relationship exists between conditions in the marriage and the labour market. In another equilibrium, worker's increase their reservation wage in the amount required to become marriageable, generating instead a one way relationship between the markets.
Author(s): Bonilla R
Publication type: Report
Publication status: Published
Series Title: Newcastle Discussion Papers in Economics
Year: 2009
Pages: 31
Print publication date: 01/07/2009
Source Publication Date: 07-2009
Report Number: WP04-2009
Institution: Newcastle University Business School
Place Published: Newcastle-upon-Tyne
URL: http://www.ncl.ac.uk/nubs/assets/documents/workingpapers/economics/WP04-2009.pdf
Notes: ISSN: 1361-1837
