Essays on Household Formation and Income Inequality

The first chapter of this dissertation examines causes of marital sorting and implications of rapid adoption of new search technologies expanding individuals' choice sets for their potential spouses. Marital sorting along education, income and other salient dimensions is well-documented for many countries. Understanding the mechanisms behind such sorting is important because the degree of marital sorting may influence income inequality, intergenerational mobility, and household labor supply, as well as other economic outcomes. Marital sorting is often thought to arise from some combination of people's preferences and constraints on their choice sets. However, separating these two causes of marital sorting is difficult because typical data sets provide information on either a person's spouse or a person's dating partners, but not both. This paper circumvents this difficulty by using a novel data set from a major Korean matchmaking company which contains both types of information. The paper analyzes gender-specific marital preferences by estimating a marriage model. Using the estimated model, I find that constraints on people's choice sets may account for a substantial fraction of observed sorting along education and industry in the general population. The recent development of new search technologies, such as online dating services, alleviates these constraints and thus may reduce marital sorting along these dimensions. I also find evidence that changing individual-level income inequality has a very limited impact on marital sorting, implying that such changes are unlikely to be amplified at the household-level by endogenous marital sorting. The second chapter examines the role of education on sectoral allocation of labor force and economic growth. Recent work in development economics emphasizes the reduction in barriers to the efficient allocation of inputs as a source of economic growth. Such growth is often accompanied by a structural transformation of the economy as factors of production move from low- to high-productivity sectors. This paper examines the impact of rising education on labor reallocation from agriculture to non-agriculture in China from 1978 to 2004 and asks what portion of China's rapid growth during this period can be accounted for by this channel. We argue that increased educational attainment effectively reduces barriers which limit the flow of workers into nonagricultural jobs. We find increased educational attainment explains about 25 percent of the productivity growth attributable to labor reallocation. Overall, we find that rising education accounts for roughly 9 percent of the annual growth in Chinese output per worker, with 7 percent coming through the facilitation of labor reallocation between sectors and 2 percent of growth from increased human capital of workers within sectors. We conclude that considering education's role in facilitating labor reallocation is important for understanding its impact on economic growth.

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