Marriage Dynamics, Earnings Dynamics, and Lifetime Family Income

We examine what determines the family income that men and women experience over their adult lives. To this end, we estimate a dynamic model of earnings, nonlabor income, fertility, marriage, and divorce. We use the model to address a number of important questions in labor and family economics, including the effects of education and unobserved permanent characteristics on marital status and on spouse characteristics conditional on marriage. We estimate the dynamic response of wage rates, work hours, earnings, marriage and spouse characteristics and family income to various shocks. Marital status has a much larger effect on family income for women than men, while labor market shocks to men are more important than shocks to women. Marital sorting plays a major role in the return to education and permanent wages, especially for women. We use the model to provide gender-specific estimates of the contribution of education, permanent wages, labor market shocks, spouse characteristics, and marital histories to the variance of family income at a given age and over a lifetime.