Friday Seminar - "Marriage, Assortative Mating and Wealth Inequality" - Andreas Fagereng (BI)

"Marriage, Assortative Mating and Wealth Inequality"

Abstract: We use population data on capital income and wealth holdings for Norway to measure asset positions and wealth returns before individuals marry and after the household is formed. These data allow us to establish a number of novel facts. First, individuals sort on personal wealth rather than parents’ wealth. Assortative mating on own wealth dominates, and in fact renders assortative mating on parental wealth statistically insignificant. Second, people match also on their personal returns to wealth and assortative mating on returns is as strong as that on wealth. Third, post-marriage returns on family wealth are largely explained by the return of the spouse with the highest pre-marriage return. This suggests that family wealth is largely managed by the spouse with the highest potential to grow it. This is particularly true for households at the top of the wealth distribution at marriage, providing a microfoundation for the scale dependence in wealth returns documented in several empirical papers. Fourth, marriage lowers the heterogeneity in returns as well as the degree of wealth inequality relative to the counterfactual case of no marriages. We use a simple analytical example to illustrate how the inequality attenuating role of marriage is affected by assortative mating on wealth and returns and wealth management task allocation between spouses.