CORDIS - EU research results

Changing Families: Causes, Consequences and Challenges for Public Policy

Final Report Summary - CHANGING FAMILIES (Changing Families: Causes, Consequences and Challenges for Public Policy)

Consider how different households in the U.S. and other industrialized countries look today relative to just a few decades ago. First, a smaller proportion of the adult population is married today than in the past. A smaller number of people marry during their lifetimes and if they do marry, they do so later and are more likely to divorce. The retreat from marriage has been more dramatic for some groups than others. In the U.S. the decline in married population among blacks has been particularly drastic. There has also been a rise in assortative mating by education, i.e. individuals are more likely to get married with someone with the same level of education. Furthermore, marriage is no longer considered a prerequisite for having children or having sex. In the past, out-of- wedlock births were rare and premarital sex was stigmatized. Today, both out-of-wedlock births and premarital sex are common, and premarital sex is no longer a taboo. Second, the amount of time allocated to market work by married households has increased markedly over the post-war period. This was critically driven by a rise in labor-force participation by married females. As a result, today’s households are very far from the traditional breadwinner husband and housekeeper wife paradigm. We live in a different world. These dramatic changes in household and family structure were accompanied by a sharp increase in income inequality among household; a development that has been receiving growing attention in both academic and non-academic circles.

The project Changing Families: Causes, Consequences, and Challenges for Public Policy had two main goals. The first goal is to try to understand the causes and consequences of changing family patterns. In "From Shame to Game in One Hundred Years: The Rise in Premarital Sex and its Destigmitization" with Jesus Fernandez Villaverde and Jeremy Greenwood, which is published in the Journal of European Economic Association in 2014, we try to understand how attitudes to sex and the incidence of premarital sex have changed dramatically over the last hundred years. We build a model where socialisation – the passing on of norms and ideologies by parents and institutions such as the church or state – is determined by the technological environment in which people live. Improvements in contraception technology lowered the chance of unwanted pregnancies from premarital sex. This reduced the need to make sex a taboo by parents and institutions, leading to higher levels of premarital sex, and despite better contraceptives, higher levels out-of-wedlock births. In "Technology and the Changing Family: A Unified Model of Marriage, Divorce, Educational Attainment and Married Female Labor-Force Participation" with Jeremy Greenwood, Georgi Kocharkov and Cezar Santos, which is published in American Economic Journal-Macroeconomics in 2016, we study how technological change affected household and family structure. Two aspects of technological change are key to understand changing families: First, improvements in household technologies (e.g. better home appliances) made running a household a much less labor-intensive activity, reducing the benefits of a traditional division of labor between husbands and wives. Second, skill-biased technological change, fuelled by information technology, opened the wage gap between more and less educated individuals and lowered the wage gap between women and men. We argue that these two forces played a key role in changing household structure. We also show that household decisions (who marries and who stays singles, who marries with whom, and how decides to participate in the labor market) have a key effect on income inequality among households. In a 2015 working paper "Is Marriage a White Institution? Understanding the Racial Marriage Divide" (with Elizabeth Caucutt and Christopher Rauh), we study the effect of higher incarceration rates among Blacks in the US on their marriage patterns. The basic idea is that Black men are risky husbands; they are more likely to lose their jobs and more likely to go to prison. Our results indicate that a large part of the Black-White difference in marriage patterns can be attributed to differences in incarceration rates. Finally, in a 2014 working paper, "Does Marriage Make You Healthier?" (Yuliya Kulikova and Joan Llull), we study the relationship between marriage and health for working-age (20 to 64) individuals. Married agents are healthier than unmarried ones, and the health gap between married and unmarried agents widens by age. After controlling for observables, a gap of about 12 percentage points in self-reported health persists for ages 55-59. Our results indicate that association between marriage and health is mainly driven by selection into marriage at younger ages, while there might be a protective effect of marriage at older ages. A key effect of marriage on health is that married people are more likely to engage in healthy behavior than singles do.

The second goal of the project is to understand the implications of changing household and family structure for public policy. In "Income Taxation of US Households: Facts and Parametric Estimates", with Remzi Kaygusuz and Gustavo Ventura, which was published in Review of Economic Dynamics in 2014, we document income taxes faced by different households in the U.S. In "Taxing Women: A Macroeconomic Analysis" with Remzi Kaygusuz and Gustavo Ventura, which was published in Journal of Monetary Economy in 2012, we study economic consequences of taxing men and women differently, using so-called gender based taxation. Our results show that relative to the current system of taxation in the U.S. setting a proportional tax rate on married females that is lower than that on married males lead to a significant increase in married female labor force participation. Furthermore, gender-based taxes improve welfare and are preferred by a majority of households. We also show, however, that welfare gains are higher when the tax system is replaced by a proportional, gender-neutral income tax. In a 2015 working paper "Childcare Subsidies and Household Labor Supply", with Remzi Kaygusuz and Gustavo Ventura, we evaluate the macroeconomic implications of childcare subsidies. We try to understand what would happen if the U.S. adopted a Scandinavian style generous and universal child care subsidy program. We find that that childcare subsidies have substantial impact on female labor supply, and lead to a large reallocation of hours worked, from males to females. Universal childcare subsidies available to all households lead to long-run increases in labor force participation of married females of about 10%. Overall, individuals, in particular females, would be happier to start their lives in an economy with child care subsidies.