Is Marriage Poisonous? Are Relationships Taxing? An Analysis of the Male Marital Wage Differential in Denmark

Abstract

[Author Affiliation]Nabanita Datta Gupta, CIM, IZA, Danish National Institute of Social Research, Herluf Trollesgade 11, DK 1052 Copenhagen K, Denmark; ndg@sfi.dkNina Smith, CIM, IZA, and Department of Economics, Aarhus School of Business, Prismet, Silkeborgvej 2, DK-8000 Aarhus C, Denmark; nina@asb.dkLeslie S Stratton, CIM, IZA, Virginia Commonwealth University, P.O. Box 844000, Richmond, VA 23284-4000, USA; lsstratt@vcu.edu; corresponding author[Acknowledgment]We are grateful to Mette Kornvig, Astrid Wurtz, and Camilla Osterballe Pedersen for very helpful research assistance. We gratefully acknowledge financial support from the Danish Social Research Council, FSE. Leslie Stratton also gratefully acknowledges support from a 2005 Summer Research Grant from the Virginia Commonwealth University School of Business. Note that these data, like U.S. Social Security records, are not publicly available because of their detailed and sensitive nature.1. IntroductionThe word for in Danish is the same as the word for poison. The word for sweetheart in Danish is the same as the word for tax. In this paper, we expand on the literature that documents a significant marital wage premium for men in the United States to see if a similar differential exists for married men in Denmark--or if the homonyms have perhaps less of a double meaning.The existence of a marital wage premium for white men in the United States has been well documented empirically. Criticisms have focused on researchers' failure to clearly ascertain why wages change with marital status and on the imperfect nature of the data sets employed in the analysis, which generally contain relatively few men who have never married and incomplete marital histories. We use a large, 10-year panel sample of young Danish men in order to address these concerns. We have a complete relationship history for every respondent and a large fraction of never-married men. Substantial U.S.-Danish differences in marriage and childbearing behavior as well as in social norms regarding relationships and intrahousehold specialization are exploited to generate predictions regarding the Danish results that are tested in the empirical analysis. Of particular interest are the prevalence of cohabiting relationships in Denmark that allows us to test for wage differences by type of relationship, the evidence that Danish households are less specialized than U.S. households that allows us to explore the nature of the marital wage differential, and the very different pattern of childbirth and marriage that allows us to test for a distinct fatherhood effect. If wages are directly linked to productivity and if relationship type, intrahousehold specialization, and/or parenthood are linked with market wage differentials, policymakers should be apprised of the full cost of social legislation designed to alter these household choices.2. Literature ReviewThe observation that married men earn more than men who have never married is not in itself surprising. Married men are typically older than never-married men, and older men have more experience, hence higher earnings, than their younger counterparts. Yet there also exists substantial evidence (for a review of the U.S. literature, see Ribar 2004) that married men earn more than never-married men with the same level of education, experience, and other observable characteristics. This fact can be explained in a number of ways.Men who marry may be more productive throughout their lives than men who do not marry. This greater productivity makes them better providers and hence better marriage partners. This possibility can be explored econometrically either by simultaneously modeling both the decision to marry and wages (Nakosteen and Zimmer 1987; Chun and Lee 2001) or by using panel data on wages to estimate fixed-effects models that control for all unobservable, individual-specific, time-invariant factors (an early example being Korenman and Neumark 1991), or by using twins studies to control for twin-specific effects (Antonovics and Town 2004; Krashinsky 2004). …