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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 and a matching marriage market interact. The economy is populated by homogeneous workers, and marriage partners (MPs). Workers simultaneously search for 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. I assume that 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. Noisy search in the labour market generates a distribution of wages. I show that the so called married wage premium can be the consequence of frictions in both markets, without having to resort to the typical explanations. In one equilibrium, MPs marry only high earners, while workers accept wages that render them "unmarriageable". Workers’ reservation wages must compensate them for the loss of marriageability in addition to the option of continued search for better wages. This affects the distributions of wages offered and earned, which are in turn crucial in the MPs decision to marry/reject low earners. In another, equilibrium, workers always find it optimal to increase their reservation wage in just the amount required to become marriageable, generating instead a one way relationship from MPs behaviour to worker’s reservation wage.
Author(s): Bonilla R
Publication type: Conference Proceedings (inc. Abstract)
Publication status: Published
Conference Name: EBES 2010 annual conference (Eurasia Business And Economics Society)
Year of Conference: 2010