Investment in Schooling and the Marriage Market

We present a model in which investment in schooling generates two kinds of returns: the labor-market return, resulting from higher wages and a marriagemarket return, defined as the impact of schooling on the marital surplus share one can extract. Men and women may have different incentives to invest in schooling because of different market wages or household roles. This asymmetry can yield a mixed equilibrium with some educated individuals marrying uneducated spouses. When the labor-market returns to schooling rises, home production demands less time and the traditional spousal labor division norms weaken, more women may invest in schooling than men. ∗Ellana Melnik and Linor Kiknadze provided valuable research assistance. Murat Iyigun’s research has been funded by NSF, Human and Social Dynamics Grant No: SES-0527751. We have benefited from various comments at the 2006 SOLE, SED, DEGIT conferences as well as seminars at Columbia University, New York University, Sabanci University, Tel Aviv University, University College London, Harvard Kennedy School, and the University of Colorado. Corresponding author: Murat Iyigun, Department of Economics, University of Colorado, Boulder, 80309-0256. Phone: (303) 492-6653. Fax: (303) 492-8622. E-mail: [email protected] †Columbia University. ‡University of Colorado, CID at Harvard University and IZA. §Tel Aviv University and IZA.