Marriage wage premium with contract type heterogeneity

Abstract

We present a model of interlinked labour and marriage markets, both characterised by sequential search, where men are seen as breadwinners in the family. Two types of jobs exist – temporary and permanent. Men’s reservation strategy in their labour market search results in two reservation wages - one for each type of job. Women’s reservation strategy in their marriage market search results in two distinct reservation wages: for men on temporary jobs and for men on permanent jobs, where the former is higher. This reflects a trade-off between husband’s wage and type of contract. This generates equilibria with a positive marriage wage premium for all workers, but higher for temporary workers. We successfully test our results using Spanish data. Linked to this, we also find that permanent employment is linked to higher wages among never married workers, but to lower wages among married employees. We argue that the traditional arguments of specialisation and selection for a marriage wage premium predict the opposite results.