Spouses' earnings association and inequality: A non-linear perspective

Area of Science:

• Economics
• Sociology
• Demography

Background:

• Spousal earnings association and its link to household inequality are complex.
• Understanding non-linear relationships is crucial for accurate analysis.

Purpose of the Study:

• To analyze the association between spouses' earnings, considering non-linearities.
• To investigate the contribution of rank-dependence, labor force participation, and couple formation to U.S. inequality from 1967-2018.

Main Methods:

• Analysis of non-linear associations between spouses' earnings.
• Simulations to model the impact of changes in rank-dependence, labor force participation, and couple formation.
• Examination of temporal and distributional heterogeneity.

Main Results:

• Increased positive sorting in earnings significantly raised inequality among dual-earner couples but had minimal impact on overall household inequality.
• Declining couple formation substantially contributed to rising inequality.
• Increased female labor force participation and decreased fertility had equalizing effects on household income.

Conclusions:

• Spousal earnings association and demographic shifts play a critical role in shaping U.S. income inequality.
• Heterogeneity in earnings association across the distribution and over time is substantial.
• Policy implications regarding couple formation and labor market participation are evident.