The Fall in Men's Return to Marriage: Declining Productivity Effects or Changing Selection?

Abstract

Historically one of the most robust findings from human capital wage equations has been that married men earn more than men who never marry. However the earnings premium paid to [U.S.] married compared with never-married men declined by more than 40 percent during the 1980s. Data from the National Longitudinal Surveys (young men and youth cohorts) are used to explore two competing explanations for this decline: changes in the selection of high-wage men into marriage and changes in the productivity effects of marriage due to declining specialization within households. The results suggest that the drop in the marriage wage premium was due largely to a decline in the productivity effects associated with marriage. Instrumental variables estimation suggests that these declining productivity effects can be explained by a reduction in the average degree of specialization across households coupled with an increase in the wage penalty associated with wives labor market hours. (EXCERPT)