Investment in Schooling and the Marriage Market

Abstract

We present a model with pre-marital schooling investment, endogenous marital matching and spousal specialization in homework and market production. Investment in schooling raises wages and generates two kinds of returns in our framework: a labor-market return and a marriage-market return because education can affect the intra-marital share of the surplus one can extract from marriage. We consider a household production function in which the schooling of spouses are complements, yielding positive assortative matching. If men and women have different market returns or household roles, they may have different incentives to acquire schooling, yielding a mixed equilibrium where some educated individuals marry uneducated spouses and those who educate less extract a relatively larger share of the marital surplus. The existence of large and frictionless marriage markets creates competition among potential spouses, precludes bargaining and generates premarital investments that are efficient. By combining the observations that the gender earning gap declines with schooling and that women’s household time obligations have declined over time, our model provides an explanation for why women now attain higher schooling levels than men.