Household Search and the Marital Wage Premium†

Abstract

We develop a model where selection into marriage and household search generate a marital wage premium. Beyond selection, married individuals earn higher wages for two reasons. First, income pooling within a joint household raises risk-averse individuals' reservation wages. Second, married individuals climb the job ladder faster, as they internalize that higher wages increase their partner's selectivity over offers. Specialization according to comparative advantage in search generates a premium that increases in spousal education, as in the data. Quantitatively, household search explains 10-33 percent and 20-58 percent of the premium for males and females, respectively, and accounts for its increase with spousal education. (JEL D83, J12, J16, J24, J31, J64)