Marry Your like: The More the Richer You Are. Assortative Mating and Income Inequality

Saturday, June 25, 2016: 4:15 PM-5:45 PM
420 Barrows (Barrows Hall)
Carlo V. Fiorio, University of Milan, Milan, Italy
Paper proposal for the SASE Annual conference, June 24‐26, 2016 ‐ University of California, Berkeley

Marry your like: the more the richer you are. Assortative mating and income inequality

Carlo Fiorio and Stefano Verzillo (University of Milan)

Background: There is increasing evidence that assortative mating is an important driver of income inequality (Hu and Myles, 2008; Lam, 1997; Schwartz and Mare, 2005, among others). Greenwood et al (2014) documented an increase in positive assortative mating for the period 1960 to 2005, using data from the U.S. Census Bureau. They show that people are more likely today than in the past to marry someone from the same educational class and they analyze how this shift in marital sorting affects household income inequality. They find that the rise in assortative mating, per se, has had a very modest impact on household income inequality, whereas they highlight that the dramatic uptick in the number of single households appears to have a stronger connection with widening income inequality. The assortative mating analysis performed using US data is constrained by using mostly education variables as only a couple’s income is known without detail of the earnings of each spouse. As for income inequality there is vastly increasing evidence that income inequality has been increasing largely because of an increase of top income shares, especially during recent decades (Alvaredo et al. 2013, Atkinson and Piketty 2007 and Piketty and Saez 2003, among many others).

Main research questions: In this paper we address two main questions. The first refers to assortative mating: it is true that assortative mating increases as income increases, and is there any evidence suggesting in particular that the very top income earners tend to marry among themselves? The second regards income inequality: does this pattern of assortative mating affect income inequality?

Data: We use a large administrative dataset of tax forms from the Lombardy Italian region (Mezzanzanica et al., 2013), the richest and one of the largest of Italy, counting about 10 million inhabitants. It collects the population of tax declarations over 5 years (2007‐2011). The unique advantages of this dataset are that, first its size and its administrative nature allow for an analysis of top income and in particular of top 1% of the income distribution, second by collecting individual tax records (the individual tax unit used in Italy is the individual) and by recording all individual tax identifier it allows for an exact identification of married couples and an analysis of assortative mating by the level of individual earnings.

Preliminary findings: Descriptive analysis of the dataset shows that assortative mating tend to increase with income of either one of the spouses, however it is between 2 to 3 times larger for individuals in the top 1% of the income distribution. We also estimate a model of assortative mating with the following simple specification: 

yw=Xw' β+γ yh+T'δ + ε

Where yi, i=w,f is the log of i’s yearly income (w stands for wife and h stands for husband), X is a set of individual characteristics and T is a set of time dummies. Using OLS we find that the increasing assortative mating coefficient (γ is statistically significant and that it is larger when both wife and husband belong to the top decile of their respective income distribution. This is likely to have an effect on the income distribution which we assess compared with a counterfactual situation, where assortative mating is less likely. Preliminary analysis shows that assortative mating increases with (log‐) yearly income and is significantly larger when both spouses belong to the top 10% of the income distribution.

Analysis yet to be performed: The analysis of assortative mating, and its significantly larger size for very top incomes, is likely to have relevant effect on income inequality. This will be studied with counterfactual analysis but no result is available, yet. Moreover, a final analysis is planned and stems from the consideration that the level of assortative mating found in the top 1% of income could be explained by the fact that, by splitting income among spouses, a couple could reduce its total income taxation by redistributing income among spouses. If this was true, we would find that correlation of individual income of spouses the year after getting married is larger than the year before marriage and that spouses’ income change in opposite direction after getting married. This hypothesis is to be tested soon and if found statistically significant is likely to provide relevant policy implications.

Main references:

Alvaredo, Facundo, Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez. (2013) "The Top 1 Percent in International and Historical Perspective", Journal of Economic Perspectives, 27(3): 3‐20

Atkinson, A.B. and T. Piketty (2007), eds., Top incomes, a global perspective, Oxford University Press

Jeremy Greenwood, Nezih Guner, Georgi Kocharkov and Cezar Santos (May 2014, revised), " Marry Your Like: Assortative Mating and Income Inequality," American Economic Review (Papers and Proceedings), v. 104, no. 5: 348‐353

Hou, Feng and John Myles. (2008) “The Changing Role of Education in the Marriage market: Assortative Marriage in Canada and the United States since the 1970s”, Canadian Journal of Sociology, 33 (2): 337‐366

Lam, David. (1997) “Demographic Variables and Income Inequality”, In Handbook of Population and Family Economics, edited by Mark R. Rosenzweig and Oded Stark, 1015–1059. Amsterdam, Elsevier North Holland

Mezzanzanica M., Santoro A., Verzillo S. (2013) The redistributive impact of taxation when families are accounted for: Evidence from italy. Fifth ECINEQ Meeting, Bari

Piketty, T. and Saez, E. (2004) "Income Inequality in the United States, 1913‐1998", Quarterly Journal of Economics, 118(1), 1‐39

Schwartz, Christine R. and Mare, Robert D. (2005) “Trends in Educational Assortative Marriage from 1940 to 2003”, Demography, 42 (4): 621‐646