Marital sorting, family output, and wealth inequality

Abstract

In this article, we analytically model marital sorting, intergenerational transfers, and inequality in a household optimization model with uncertainty. We modify and apply a ‘sorting, reverse sorting’ numerical approach by Demirtas in the context of marriage market mating, illustrating the robustness of our analytical results. We show that the parameters of the family production function play an important role in driving the path of an economy’s inequality. One finding is that, under assortative mating, factor shares in the family production function positively affect inequality, while under disassortative mating, the relationship between the factor shares and inequality is U-shaped. This and other results that we obtain can stimulate further empirical research, holding potentially important policy implications.