Progress in closing gender gaps has been made, but women around the world still earn less than men in the labour market (Ciminelli and Schwellnus 2021, Sánchez-Mangas and Sanchez-Marcos 2020, Bøler et al. 2015). At the same time, income inequality across households has increased in recent decades (Greenwood et al. 2014 and 2016).
A growing literature studies the link between labour market choices and gender earnings gaps, particularly the effects of lower labour force participation and fewer hours worked by women (Adda et al. 2017, Goldin 2014, Cortés and Pan 2019). Furthermore, positive sorting in the labour market – the fact that more skilled workers are employed in more demanding jobs and work for more productive firms – has been shown to fuel wage inequality (Lindenlaub 2017). Other areas of research have shown that positive sorting in the marriage market – the fact that similarly educated individuals tend to marry each other – puts upward pressure on between-household inequality (Lise and Seitz 2011, Dupuy and Weber 2018). However, no previous analysis of inequality featured both the marriage and the labour market in equilibrium.
A model to understand the link between marriage market sorting, labour market sorting and inequality
Our analysis (Calvo et al. 2021) provides a unified perspective on inequality, stressing that the interactions between marriage and labour market sorting are crucial for a better understanding of this issue. At the heart of our analysis is the question: How do people’s marriage choices affect their labour market choices, and ultimately gender wage gaps and income inequality?
The proposed mechanism is novel yet intuitive. Who marries whom impacts how spouses allocate their time between their jobs and household duties. And if in the labour market employers care not only about workers’ skills but also about how many hours they supply, then individuals’ time allocations also impact their labour market match. Thus, the time allocation choice made jointly within the household is the link between the marriage and the labour market. Our new equilibrium model, which features heterogeneity across agents and sorting in both markets, captures these choices.
Our model suggests a key mechanism: the nature of the home production technology shapes equilibrium. In particular, whether the time spouses work at home is more productive when both partners put in similar hours – for example, if children’s outcomes improve when both parents make similar investments – is critically related to who marries whom, their choices on how to split their time between labour market work and housework, and which job to choose.
In our model, when it is more productive that partners share household duties more equally – i.e. if home production time is complementary – individuals are more likely to marry someone with similar education (positive marriage sorting), form dual-career couples, and share childcare and housework. This reduces the gender gaps in (positive) labour market sorting and pay, and ultimately lowers inequality within households – reflecting a society with ‘progressive’ gender roles. But even with narrow gender gaps within the household, our model predicts an increase in inequality between households.
In contrast, when household specialisation pays off – i.e. if home production time is substitutable among spouses – individuals are more likely to marry someone of different education and form single-earner households, with one of the partners – typically a woman – specialising in household duties. This characterises a society with ‘traditional’ gender roles, leads to wider gender gaps in the labour market as men work more hours in better-paying jobs, and ultimately increases inequality within households.
Thus, whether work at home is more productive when equally shared or when one spouse assumes the bulk of it – which can potentially depend on factors such as childcare availability and quality, the development of new household technologies, the possibility to outsource housework, and even policies like paid parental leave – affects gender gaps in the labour market and inequality.
The nature of home production in the data
Still, the nature of home production is an empirical question. We provide an answer by estimating our model on household data from West Germany from the German Socio-Economic Panel. The estimates indicate that spousal home production time is indeed complementary in Germany (2010-2016) and that these complementarities increased over time (between 1990 and 2016). We show evidence that the uncovered home production complementarities are mainly driven by childcare, as opposed to other house chores (like running errands or cleaning), in which partners’ time is naturally much more substitutable. These findings are in line with evidence pointing to an increased fraction of time spent in childcare by both mothers and fathers, especially for highly educated spouses (Ramey and Ramey 2010).
How have stronger home production complementarities impacted gender and household inequality over time?
Total changes in home production technology between 1990 and 2016 – i.e. the increase in home production complementarities and the decrease in women’s relative productivity at home – explain around 70% of the observed decline in the gender wage gap and the entire drop in within-household inequality between 1990 and 2016 in Germany. Stronger complementarities in isolation account for one-third of the impact of home production changes on these inequality shifts. In contrast, changes in labour market technology, which we interpret as skill-biased technological change, had very different effects. They fuelled gender and household inequality across the board, preventing gender disparities from falling even further.
Importantly, the increase in positive sorting in both the marriage and the labour market further mitigated gender disparities in Germany over the last decades. Marriage market sorting and labour market sorting increased by 10% and 8%, respectively, and significantly affected these inequality shifts. If sorting patterns had stayed constant at their 1990 levels, gender inequalities would be wider today and between-household inequality narrower. Intuitively, stronger marriage market sorting over time generated more gender-balanced labour market outcomes in hours, sorting, and pay. In turn, the increase in labour sorting over the past decades also narrowed gender disparities significantly, since it was predominantly driven by women's improved labour sorting; this helped them catch up with men's pay.
Concluding remarks
Our analysis suggests that the interaction of both the marriage and the labour market crucially impacts inequality across gender and within/between households. Therefore, policies that affect who marries whom (such as tax policies) or home production choices (such as parental leave or universal childcare) can mitigate or amplify inequality, calling for a better understanding of these spillovers across markets.
References
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Calvo, P, I Lindenlaub, and A Reynoso (2021), “Marriage market and labor market sorting”, NBER Working Paper 28883.
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