Chapter 3 Marriage and the Family marriage and family trends gains from marriage marriage market marriage and family trends gains from marriage marriage

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<ul><li> Slide 1 </li> <li> Chapter 3 Marriage and the Family marriage and family trends gains from marriage marriage market marriage and family trends gains from marriage marriage market </li> <li> Slide 2 </li> <li> Why marriage? Eventually over 90% of adults will be married at some point in their lives for women marriage has been occupation identity Eventually over 90% of adults will be married at some point in their lives for women marriage has been occupation identity </li> <li> Slide 3 </li> <li> family structure has a big influence on economic well-being U.S. poverty rate overall: 12% for married couples: 5.5% for female-headed households: 26% family structure has a big influence on economic well-being U.S. poverty rate overall: 12% for married couples: 5.5% for female-headed households: 26% </li> <li> Slide 4 </li> <li> marriage is economic behavior women and men choose to get married, when to get married, who to marry, to maximize their well-being women and men choose to get married, when to get married, who to marry, to maximize their well-being </li> <li> Slide 5 </li> <li> a family is a mini-economy production allocation of scarce resources what to buy with/in budget use of time production allocation of scarce resources what to buy with/in budget use of time </li> <li> Slide 6 </li> <li> I. A look at data marriage households household income marriage households household income </li> <li> Slide 7 </li> <li> Slide 8 </li> <li> Slide 9 </li> <li> Slide 10 </li> <li> Slide 11 </li> <li> Slide 12 </li> <li> cohabitationcohabitation POSSLQ (Census Bureau) risen from 1% to 7.5% of married couples 10% of adults 25-29 cohabitate same-sex couples not directly tracked estimated at most 360,000 HH POSSLQ (Census Bureau) risen from 1% to 7.5% of married couples 10% of adults 25-29 cohabitate same-sex couples not directly tracked estimated at most 360,000 HH </li> <li> Slide 13 </li> <li> 2000 census less than 5% of men and women over 65 have never been married conclusion: most people expect marriage to make them better off less than 5% of men and women over 65 have never been married conclusion: most people expect marriage to make them better off </li> <li> Slide 14 </li> <li> Households (HH) in the U.S. 290 million people (2001) 109 million HH HH is people who occupy same housing unit (house, apt., dorm room) Family HH includes related people 290 million people (2001) 109 million HH HH is people who occupy same housing unit (house, apt., dorm room) Family HH includes related people </li> <li> Slide 15 </li> <li> Slide 16 </li> <li> Slide 17 </li> <li> Slide 18 </li> <li> Slide 19 </li> <li> Slide 20 </li> <li> II. Gains to Marriage specialization principal-agent problem economies of scale risk sharing specialization principal-agent problem economies of scale risk sharing </li> <li> Slide 21 </li> <li> SpecializationSpecialization we observe men tend to be larger earner in HH (sole earner 22% of HH) women in HH spend more time on housework, childcare, etc we observe men tend to be larger earner in HH (sole earner 22% of HH) women in HH spend more time on housework, childcare, etc </li> <li> Slide 22 </li> <li> example: Ed &amp; Liz choose between market &amp; nonmarket work Liz $500 week in market work OR $400 week in nonmarket work OR something in between choose between market &amp; nonmarket work Liz $500 week in market work OR $400 week in nonmarket work OR something in between </li> <li> Slide 23 </li> <li> Ed $1000 week in market work OR $420 week in nonmarket work OR something in between Ed $1000 week in market work OR $420 week in nonmarket work OR something in between </li> <li> Slide 24 </li> <li> market nonmarket 1000 420 500 400 Ed Liz </li> <li> Slide 25 </li> <li> Ed has absolute advantage in BOTH market &amp; nonmarket work 1000 &gt; 500 420 &gt; 400 why did he marry Liz? still gains from specializing &amp; sharing output Ed has absolute advantage in BOTH market &amp; nonmarket work 1000 &gt; 500 420 &gt; 400 why did he marry Liz? still gains from specializing &amp; sharing output </li> <li> Slide 26 </li> <li> comparative advantage Liz is close to Ed in nonmarket production but way worse in market production Liz has comp. adv. in nonmarket work gains to specializing Liz is close to Ed in nonmarket production but way worse in market production Liz has comp. adv. in nonmarket work gains to specializing </li> <li> Slide 27 </li> <li> case 1: Ed &amp; Liz do not share time divided 60% market work 40% nonmarket work do not share time divided 60% market work 40% nonmarket work do not share </li> <li> Slide 28 </li> <li> Liz $300 in market work $160 in nonmarket work Ed $600 in market work $168 in nonmarket work Liz $300 in market work $160 in nonmarket work Ed $600 in market work $168 in nonmarket work </li> <li> Slide 29 </li> <li> market nonmarket 1000 420 500 400 </li> <li> Slide 30 </li> <li> case 2: Ed &amp; Liz specialize Ed does market work gives Liz 35% Liz does nonmarket work gives Ed 50% Ed does market work gives Liz 35% Liz does nonmarket work gives Ed 50% </li> <li> Slide 31 </li> <li> resultsresults Ed produces $1000 gives Liz $350, keeps $650 Liz produces $400 gives Ed $200, keeps $200 Ed produces $1000 gives Liz $350, keeps $650 Liz produces $400 gives Ed $200, keeps $200 </li> <li> Slide 32 </li> <li> Ed $650 market, $200 nonmarket (case 1: $600, $168) Liz $350 market, $200 nonmarket (case 1: $300, $160) Ed $650 market, $200 nonmarket (case 1: $600, $168) Liz $350 market, $200 nonmarket (case 1: $300, $160) </li> <li> Slide 33 </li> <li> market nonmarket 1000 420 500 400 Liz Ed By specializing, both Ed and Liz do better </li> <li> Slide 34 </li> <li> why does this work? each specialize in what they do best, relative to their partner Liz specializing in nonmarket work frees Ed to specialize in market work which he does way better each specialize in what they do best, relative to their partner Liz specializing in nonmarket work frees Ed to specialize in market work which he does way better </li> <li> Slide 35 </li> <li> specialization does NOT have to be complete for there to be gains 56% of married households both spouses in labor force specialization does NOT have to be complete for there to be gains 56% of married households both spouses in labor force </li> <li> Slide 36 </li> <li> men have absolute adv. in market work because they earn more gender earning gap reinforces the gender earnings gap men have absolute adv. in market work because they earn more gender earning gap reinforces the gender earnings gap </li> <li> Slide 37 </li> <li> notenote if men, women very different in skills larger gains to specialization if men, women more alike smaller gains to specialization if men, women very different in skills larger gains to specialization if men, women more alike smaller gains to specialization </li> <li> Slide 38 </li> <li> Principal-agentPrincipal-agent someone (principal) hires someone else (agent) to do something problem: agent may not act in best interest of principal someone (principal) hires someone else (agent) to do something problem: agent may not act in best interest of principal </li> <li> Slide 39 </li> <li> exampleexample mechanic does unnecessary repairs babysitter puts kids in front of TV CEO buys $6000 shower curtain cause: incentive structure lack of monitoring mechanic does unnecessary repairs babysitter puts kids in front of TV CEO buys $6000 shower curtain cause: incentive structure lack of monitoring </li> <li> Slide 40 </li> <li> marriagemarriage incentive: love, respect, shared goals care about the others utility incentive: love, respect, shared goals care about the others utility </li> <li> Slide 41 </li> <li> Economies of scale average cost of production falls as production rises Many HH chores done for 1 person, are just as easy to do for 2 or 3 people average cost of production falls as production rises Many HH chores done for 1 person, are just as easy to do for 2 or 3 people </li> <li> Slide 42 </li> <li> examplesexamples Cooking for 1 vs. 2 Cleaning, shopping, laundry In HH with more than 1 Less time spent PER PERSON on these tasks Tasks are shared Cooking for 1 vs. 2 Cleaning, shopping, laundry In HH with more than 1 Less time spent PER PERSON on these tasks Tasks are shared </li> <li> Slide 43 </li> <li> Buying in bulk Share fixed costs of HH Furniture Appliances Bills (phone, cable) Buying in bulk Share fixed costs of HH Furniture Appliances Bills (phone, cable) </li> <li> Slide 44 </li> <li> notenote if HH is really large, diseconomies of scale as tasks take longer do not need to marry to get economies of scale if HH is really large, diseconomies of scale as tasks take longer do not need to marry to get economies of scale </li> <li> Slide 45 </li> <li> Risk-sharingRisk-sharing HH with multiple earners less likely to suffer financial distress HH with multiple earners better able to diversify employers investments true more for spouses than roommates HH with multiple earners less likely to suffer financial distress HH with multiple earners better able to diversify employers investments true more for spouses than roommates </li> <li> Slide 46 </li> <li> III. The Marriage Market notation Z M = total output of single man Z F = total output of single woman Z MF = total output of married HH S F = wifes share of Z MF wife S M = husbands share of Z MF = Z MF - S F notation Z M = total output of single man Z F = total output of single woman Z MF = total output of married HH S F = wifes share of Z MF wife S M = husbands share of Z MF = Z MF - S F </li> <li> Slide 47 </li> <li> if S M &gt; Z M then man will marry if S F &gt; Z F then woman will marry since most people marry, then usually Z MF &gt; Z M + Z F if S M &gt; Z M then man will marry if S F &gt; Z F then woman will marry since most people marry, then usually Z MF &gt; Z M + Z F </li> <li> Slide 48 </li> <li> SupplySupply supply of women willing to marry how many women will marry at each level of S F if S F high, a lot of women will want to marry as S F falls, fewer women will want to marry supply of women willing to marry how many women will marry at each level of S F if S F high, a lot of women will want to marry as S F falls, fewer women will want to marry </li> <li> Slide 49 </li> <li> SFSF # of women Supply max. amount of women </li> <li> Slide 50 </li> <li> DemandDemand demand curve of men for wives how many men are willing to marry at each level of S F if S F high, then S M is low, and few men will want to marry as S F falls, S M rises, so more men will want to marry demand curve of men for wives how many men are willing to marry at each level of S F if S F high, then S M is low, and few men will want to marry as S F falls, S M rises, so more men will want to marry </li> <li> Slide 51 </li> <li> SFSF # of women, men Supply DemandN* SF*SF* </li> <li> Slide 52 </li> <li> comparative statics what happens when sex ratio changes womens wages change there is a sexual revolution what happens when sex ratio changes womens wages change there is a sexual revolution </li> <li> Slide 53 </li> <li> change in sex ratio # women per 100 men how? war changing birth rates (men marry younger women) gender preference (China) # women per 100 men how? war changing birth rates (men marry younger women) gender preference (China) </li> <li> Slide 54 </li> <li> rising sex ratio increase in women relative to men supply increases shifts right increase in women relative to men supply increases shifts right </li> <li> Slide 55 </li> <li> SFSF # of women, men Supply DemandN* SF*SF* Supply </li> <li> Slide 56 </li> <li> rising female wages increases Z F women less willing to marry at any given level of S F supply decreases shift left increases Z F women less willing to marry at any given level of S F supply decreases shift left </li> <li> Slide 57 </li> <li> SFSF # of women, men Supply DemandN* SF*SF* </li> <li> Slide 58 </li> <li> sexual revolution contraception makes sex outside of marriage less risky single well-being increases Z M and Z F increase women less willing to marry supply decreases men less willing to marry demand decreases contraception makes sex outside of marriage less risky single well-being increases Z M and Z F increase women less willing to marry supply decreases men less willing to marry demand decreases </li> <li> Slide 59 </li> <li> SFSF # of women, men Supply DemandN* SF*SF* </li> <li> Slide 60 </li> <li> summarizesummarize marriage still popular but marriages less likely to last people wait longer to marry gains to marriage from various sources size of gains affected by differences in skills marriage still popular but marriages less likely to last people wait longer to marry gains to marriage from various sources size of gains affected by differences in skills </li> <li> Slide 61 </li> <li> marriage market determines position of husband/wife in marriage determines # of marriages explains how demographic, labor market, and social changes affects marriage marriage market determines position of husband/wife in marriage determines # of marriages explains how demographic, labor market, and social changes affects marriage </li> <li> Slide 62 </li> <li> looking ahead to Ch. 4 race and family structure marriage and mens earnings divorce race and family structure marriage and mens earnings divorce </li> </ul>