Luca Flabbi (Georgetown University)

“Simultaneous Search in the Labor and Marriage Markets with Endogenous Schooling Decisions”

(Note: the seminar is on Thursday)

Abstract

Labor market decisions are not taken in isolation when individuals areengaged in stable relationships. There now exist a number of estimatedmodels of household search able to address and estimate the impact of thesedecision processes. However, in these cases a number of simplifyingassumptions have been made that limited the usefulness of the models forpolicy evaluation purposes, notably the lack of intrahousehold behavior andof the process that led to the formation of the household.Our analysis, instead, develops and estimates a model designed to determine the joint equilibrium distribution of schooling levels, labormarket outcomes, and marriage market statuses. The model is estimated using the Method of Simulated Moments (MSM) usinglabor market information from the Current Population Survey (CPS) and marriage market information from the American Community Survey (ACS).
We plan to use the estimates of the model to perform several comparative statics exercises in order to: (i) separate the impact of thelabor market from the impact of the marriage market in determining lifetimereturns to schooling; (ii) explore the impact of eliminating genderdifferences in the wage offers distribution on marriage rates, assortativemating patterns, and schooling investments; (iii) assess the importance of marital status in determining labor market outcomes.Finally, we plan to use the parameter estimates to perform a seriesof policy experiments comparing a labor income tax system based onindividual taxation with a system based on joint taxation.