Saturday, May 27, 2017

Pierre-André Chiappori's "Matching with Transfers"

Pierre-André Chiappori is the E. Rowan and Barbara Steinschneider Professor of Economics at Columbia University and a Distinguished Fellow at the Becker Friedman Institute for Research in Economics at the University of Chicago.

He applied the “Page 99 Test” to his new book, Matching with Transfers: The Economics of Love and Marriage, and reported the following:
From page 99:
A striking feature of historical matching patterns is that even when traditional households are the dominant form of household organization, we do not observe strong negative assortative matching patterns. One possible explanation is that domestic production includes not only simple chores, but also raising children, and the parents’ human capital stocks are important inputs in the latter process. Such a feature may actually restore positive assortative matching; I will come back later to this very important issue.
This excerpt from page 99 of the book summarizes one of the main issues I discuss, namely the links between the economic role of the family and the matching patterns observed on what economists call the ‘marriage market’. Back in the 70s, the dominant model of family organization was based on strict specialization, one spouse (usually the husband) being the breadwinner and working full time on the labor market while the other specializes in domestic work. The explosion of this ‘traditional’ model is due to several causes, from technological progress in domestic production (what some economists have called ‘engines of liberation’, from the dishwasher to the microwave) to the spectacular increase in female education (in the recent generations, more women than men receive a university degree). In the book, I argue that another factor plays a crucial role in explaining recent evolutions – namely, the increased importance of education and human capital in modern societies. While fertility has always been a major motivation for family formation, the level of time, effort and resources spent on children’s education, especially at the top of the income distribution, is unprecedented.

Our models predict that this evolution should result in a higher tendency to marry ‘assortatively’ (i.e., a spouse with a similar level of human capital), particularly for educated people. This prediction is well supported by the data, although the empirical evaluation of these effects is technically challenging; actually, a significant part of the book is devoted to such methodological issues. Importantly, it raises the risk of an ‘inequality spiral’, whereby children from a privileged background receive more and better education, intermarry, and invest massively in their own children’s human capital, generating even more inequality (in income, in human capital, and more importantly in opportunities) for the next generation. It also points to the importance of early interventions: a policy aimed at reducing inequality should primarily provide children from disadvantaged backgrounds with better support during the first years of their life.
Learn more about Matching with Transfers at the Princeton University Press website.

--Marshal Zeringue