| One of the most striking changes in American society in the last forty years has been the decline and delay in marriage. The fraction of young men and women who have never been married increased significantly between 1970 and 2000. Idiosyncratic labor income volatility also increased over the same period. This first chapter of this dissertation establishes a quantitatively important link between these two facts. Specifically, if marriage involves consumption commitments, then a rise in income volatility results in a delay in marriage. Marriage, however, also allows for diversification of income risk since earnings fluctuations between spouses need not be perfectly correlated. The hypothesis that rising income volatility contributed to the delay in marriage is assessed vis-à-vis other explanations in the literature, using an estimated equilibrium search model of the marriage market. The results show that the increase in volatility accounts for about one-third of the observed delay in marriage. That is, the effects of consumption commitments due to increased income volatility outweigh the effects of the insurance gains provided by spouses.;The second chapter of this dissertation extends this analysis to the case of divorce, and the lifecycle. Since 1980 the divorce rate in the US has dropped substantially overall, but has increased markedly for older Americans. Once a couples has married the rising insurance value of marriage also leads to a decline in divorce. On the other hand, the elderly are either retired or near retirement and have grown children, and thus are less susceptible to the effects of volatility. Elderly divorce rises as younger people delay divorce. It should be noted that getting the comovements of marriage and divorce seen in the data is difficult in an economic model. Models typically capture declining marriage rates by having the value of being married decrease, which typically would result in rising divorce rates. Furthermore, if divorce rates are falling overall, but rising for the elderly, a mechanism is called for in which the decisions of the young and old are deferentially affected. |
