Monday, 7 April 2014

Women Earn Less than Half of Their Household's Income, But Why?

Last year (this bears bringing up even though it is not really recent), I attended an unusually rewarding workshop at the University of Chicago (this is saying a great deal, for almost every workshop is a veritable party in one's mind that never stops - well, at least not until the discussions are over...). This one was given by Professor Marianne Bertrand of the Booth School of Business and the topic was male-female relative earnings in married couples. In a working paper with Emir Kamenica and Jessica Pan, Bertrand displays the stunning pattern in marriages that women rather consistently contribute less than half of the household's market income. It looks as if there is widespread aversion to the woman's earning more than does the man within the household. I will offer much praise and one piece of constructive criticism on the thesis, but I start with the praise. The graph is beautiful (click to enlarge):
Households in which the wife earns more than does the husband seem to form much less frequently than do households in which the husband earns more. The discontinuity above is larger for less educated couples. Bertrand and her coauthors also document a tendency for divorce to occur more frequently in couples in which the woman earns more than fifty per cent of household income. Bertrand and her coauthors argue that this is due to a version of identity economics (made famous, most prominently, by research by George Akerlof and Rachel Kranton), saying that there is a problem in case the wife earns more than does the husband.

I really enjoyed this paper, which is all the more important considering that women are increasingly acquiring all that is needed to out-earn men (I am thinking specifically of college graduation rates, in field after field).

Now for my piece of constructive criticism. The focus in the paper is wholly on how norms shape male-female relative income within households, but not mentioned is an alternative interpretation of the data based on socio-biology. It goes as follows: Men have more to lose than have women if their spouse is unfaithful. This is standard evolutionary biology (or at least it is my impression of what is considered standard evolutionary biology). If a man is unfaithful, his wife will not spend scarce resources raising some other woman's child. But if a woman is unfaithful, her husband ends up caring for someone else's genetic material.

This means that a husband has particularly strong reasons to look for an effective punishment mechanism so that the wife will be disincentivized to cuckold him. Supposing husband and wife have equal shares in household income, the punishment is greater if the woman's contribution to it was less than half. This also means that women occasionally have incentives to commit to earning less, say by spending less time working and consequently acquiring less human capital (such as experience and on-the-job training), in order to attract a husband.

My explanation is a bit akin to the theory of efficiency wages, according to which workers receive greater compensation than their productivity would indicate in order to instill fear in them not to shirk on the job, since wages higher than marginal product imply a risk of involuntary unemployment. Analogously, if women receive a share of household income greater than the share they contribute, they will be less likely to commit adultery ("shirk"), since there would be more to lose.

However, the socio-biological explanation has no counterpart to involuntary unemployment. The woman could then simply re-marry. However, since initially the man earned more than half of household income, the probability of the wife's finding a man of similar income to her first husband is not as great as it would be if male-female incomes had initially been the same.

I don't believe anybody actually chooses their partner based on explicit thinking along my suggested lines, but evolutionary biology merely gives us certain preferences, not necessarily ready perception of them or the ability to rationalize them.

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