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Chapter 3 Marriage and the Family: 

Chapter 3 Marriage and the Family marriage and family trends gains from marriage marriage market

Why marriage?: 

Why marriage? Eventually over 90% of adults will be married at some point in their lives for women marriage has been occupation identity

Slide3: 

family structure has a big influence on economic well-being U.S. poverty rate overall: 12% for married couples: 5.5% for female-headed households: 26%

marriage is economic behavior: 

marriage is economic behavior women and men choose to get married, when to get married, who to marry, to maximize their well-being

a family is a mini-economy: 

a family is a mini-economy production allocation of scarce resources what to buy with/in budget use of time

I. A look at data: 

I. A look at data marriage households household income

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cohabitation: 

cohabitation POSSLQ (Census Bureau) risen from 1% to 7.5% of married couples 10% of adults 25-29 cohabitate same-sex couples not directly tracked estimated at most 360,000 HH

2000 census: 

2000 census less than 5% of men and women over 65 have never been married conclusion: most people expect marriage to make them better off

Households (HH) in the U.S. : 

Households (HH) in the U.S. 290 million people (2001) 109 million HH HH is people who occupy same housing unit (house, apt. , dorm room) Family HH includes related people

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II. Gains to Marriage: 

II. Gains to Marriage specialization principal-agent problem economies of scale risk sharing

Specialization: 

Specialization we observe men tend to be larger earner in HH (sole earner 22% of HH) women in HH spend more time on housework, childcare, etc

example: Ed & Liz: 

example: Ed andamp; Liz choose between market andamp; nonmarket work Liz $500 week in market work OR $400 week in nonmarket work OR something in between

Slide23: 

Ed $1000 week in market work OR $420 week in nonmarket work OR something in between

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Ed has absolute advantage in BOTH market andamp; nonmarket work 1000 andgt; 500 420 andgt; 400 why did he marry Liz? still gains from specializing andamp; sharing output

comparative advantage: 

comparative advantage Liz is close to Ed in nonmarket production but way worse in market production Liz has comp. adv. in nonmarket work gains to specializing

case 1: Ed & Liz do not share: 

case 1: Ed andamp; Liz do not share time divided 60% market work 40% nonmarket work do not share

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Liz $300 in market work $160 in nonmarket work Ed $600 in market work $168 in nonmarket work

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case 2: Ed & Liz specialize: 

case 2: Ed andamp; Liz specialize Ed does market work gives Liz 35% Liz does nonmarket work gives Ed 50%

results: 

results Ed produces $1000 gives Liz $350, keeps $650 Liz produces $400 gives Ed $200, keeps $200

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Ed $650 market, $200 nonmarket (case 1: $600, $168) Liz $350 market, $200 nonmarket (case 1: $300, $160)

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By specializing, both Ed and Liz do better

why does this work?: 

why does this work? each specialize in what they do best, relative to their partner Liz specializing in nonmarket work frees Ed to specialize in market work which he does way better

Slide35: 

specialization does NOT have to be complete for there to be gains 56% of married households both spouses in labor force

Slide36: 

men have absolute adv. in market work because they earn more gender earning gap reinforces the gender earnings gap

note: 

note if men, women very different in skills larger gains to specialization if men, women more alike smaller gains to specialization

Principal-agent : 

Principal-agent someone (principal) hires someone else (agent) to do something problem: agent may not act in best interest of principal

example: 

example mechanic does unnecessary repairs babysitter puts kids in front of TV CEO buys $6000 shower curtain cause: incentive structure lack of monitoring

marriage: 

marriage incentive: love, respect, shared goals care about the other’s utility

Economies of scale: 

Economies of scale average cost of production falls as production rises Many HH chores done for 1 person, are just as easy to do for 2 or 3 people

examples: 

examples Cooking for 1 vs. 2 Cleaning, shopping, laundry In HH with more than 1 Less time spent PER PERSON on these tasks Tasks are shared

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Buying in bulk Share fixed costs of HH Furniture Appliances Bills (phone, cable…)

note: 

note if HH is really large, diseconomies of scale as tasks take longer do not need to marry to get economies of scale

Risk-sharing: 

Risk-sharing HH with multiple earners less likely to suffer financial distress HH with multiple earners better able to diversify employers investments true more for spouses than roommates

III. The Marriage Market: 

III. The Marriage Market notation ZM = total output of single man ZF = total output of single woman ZMF = total output of married HH SF = wife’s share of ZMF wife SM = husband’s share of ZMF = ZMF - SF

Slide47: 

if SM andgt; ZM then man will marry if SF andgt; ZF then woman will marry since most people marry, then usually ZMF andgt; ZM + ZF

Supply : 

Supply supply of women willing to marry how many women will marry at each level of SF if SF high, a lot of women will want to marry as SF falls, fewer women will want to marry

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Demand: 

Demand demand curve of men for wives how many men are willing to marry at each level of SF if SF high, then SM is low, and few men will want to marry as SF falls, SM rises, so more men will want to marry

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comparative statics: 

comparative statics what happens when sex ratio changes women’s wages change there is a sexual revolution

change in sex ratio: 

change in sex ratio # women per 100 men how? war changing birth rates (men marry younger women) gender preference (China)

rising sex ratio: 

rising sex ratio increase in women relative to men supply increases shifts right

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rising female wages: 

rising female wages increases ZF women less willing to marry at any given level of SF supply decreases shift left

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sexual revolution: 

sexual revolution contraception makes sex outside of marriage less risky single well-being increases ZM and ZF increase women less willing to marry supply decreases men less willing to marry demand decreases

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summarize: 

summarize marriage still popular but marriages less likely to last people wait longer to marry gains to marriage from various sources size of gains affected by differences in skills

Slide61: 

marriage market determines position of husband/wife in marriage determines # of marriages explains how demographic, labor market, and social changes affects marriage

looking ahead to Ch. 4: 

looking ahead to Ch. 4 race and family structure marriage and men’s earnings divorce

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