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Economics of Gender Chapter 6 Assist. Prof.Dr .Meltem INCE YENILMEZ

Economics of Gender Chapter 6 Assist. Prof.Dr .Meltem INCE YENILMEZ. Marriage and the Family. Focus on 3 issues 1)  Race differences in marriage and family structure: - changes over time; - economic explanations. 2)  Male marriage premium 3)  Divorce: - economic analysis;

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Economics of Gender Chapter 6 Assist. Prof.Dr .Meltem INCE YENILMEZ

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  1. Economics of GenderChapter 6Assist.Prof.Dr.Meltem INCE YENILMEZ

  2. Marriage and the Family • Focus on 3 issues 1) Race differences in marriage and family structure: - changes over time; - economic explanations. 2) Male marriage premium 3) Divorce: - economic analysis; - economic consequences.

  3. Three Possible Explanations: 1)  Changes in marriage markets 2)   Changes in wage rates 3)   Role of the welfare system • Probably all 3 have played a role for women; some for all women, some for specific groups of women.

  4. More on Changing Marriage Markets • Male Marriageable Pool Index(MMPI): ratio of the number of employed men to the number of women (calculated separately by race and age; also could be calculated by education) • MMPI = [# employed men / # women] • Balance in marriage market: if MMPI  1, poor prospects for women • At birth: MMPI = 1 (approximately). • But what if MMPI falls?

  5. Falling MMPI • Reasons for  MMPI: 1) decline in the number of employed men 2) increase in  incarceration rates 3) increase in mortality rates • All of the above have disproportionately affected black men

  6. Women’s Wage Rates and Race Differentials in Marriage • Gains from the trade model: • As women’s wages rise, differences in market productivity between men and women falls so gains are reduced. • Data supporting this possible cause of lower marriage rates: sex wage differences less for blacks than whites. • Supply and Demand model: • As women’s wages rise, their supply of marriage curve shifts left, reducing marriage rates. • Also, as women  education, they delay fertility. So like-educated men face worse marriage prospects as well.

  7. The Welfare System • Key:  “production” while single. • Supply and Demand model: if Zf, then likelihood of marrying falls. • History of Welfare • Social Security Act of 1935: created ADC (became AFDC); now TANF. • Beneficiaries: poor mother-only families. • In 1935: mostly widows (deemed “deserving” of support) • Today: monthly benefits are quite low

  8. Marriage and the Earnings of Men • Marriage wage premium: • On average, married men earn more than unmarried men. • Hard to disentangle source of premium. • Has persisted throughout most of the 20th century and exists in other countries as well. • Three theories: 1) Married men not more productive, just paid more because employers know they support families. 2) Marriage productivity effect (from specialization); 3) Selectivity effect: more productive men more likely to marry.

  9. What about married females’ wages? • Family pay gap: • Lower wages for married women. • Lower wages for mothers. • The divorce rate started increasing in the 1950s. • Current divorce probabilities: • Within 5 years: 20% disrupted. • Within 10 years: 33% disrupted. • Within 20 years: 50% disrupted. • Disrupted= divorce or separation • Rate per thousand people actually peaked in 1981, and has been declining over the ensuing quarter century. • The divorce rate in 2008—16.7 divorces per 1000 marriages.

  10. Economic Analysis of Divorce • If marriage results from gains to trade, then divorce is the opposite; couples will divorce if they’ll be better off divorced than married. • Imperfect information and costly search • Can’t know everything about a potential spouse before marriage • Search is costly • Utility from search is maximized by balancing marginal costs and benefits of search • Information that surfaces after marriage may be positive or negative; if the latter, divorce may result

  11. The Coase Theorem • The Coase Theorem: If transaction costs are small or nonexistent, then a change in property rights does not change resource allocation but does influence wealth. • The Coase Theorem relies on four strong assumptions: • Costless bargaining • Symmetric information • Transferability

  12. The Coase Theorem (continued) • If we put the Coase Theorem in the context of divorce: • “transaction costs” are costs that are incurred when obtaining the divorce • “property rights” refer to which person in the couple gets to decide whether he or she wants to divorce.

  13. The Economic Consequences of Divorce • In general: • Decline in financial well-being of females and increase in well-being of males. • Most believable estimates: • Women: divorce results in family income decline of 27% • Men: divorce results in family income increase of 10%

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