Skill Premia and Pre-Marital Investments in Marriage Markets

TL;DR

This paper models a marriage market with search frictions and skill investments, showing how rising wages can lead to gender asymmetries in pre-marital skill investments and equilibria.

Contribution

It introduces a microfounded model explaining how wage increases influence gendered investment behaviors and market equilibria in marriage markets.

Findings

Higher skill premiums lead to one gender fully investing in skills.

Markets can exhibit asymmetric equilibria despite symmetric environments.

As wages rise, the equilibrium shifts from symmetric to asymmetric.

Abstract

I study a decentralized marriage market with search frictions, costly pre-marital skill investments, and non-transferable utility. Despite a symmetric environment, the market can exhibit asymmetric equilibria, with one gender investing more in skills than the other; in some environments, the asymmetric equilibrium is unique. A microfounded model of household utility maximization shows that this transition from a unique symmetric equilibrium to a unique asymmetric equilibrium can be driven by rising labor-market wages for high-skilled workers: as the skill premium rises, one gender ends up fully investing while the other invests substantially less.