Male investment in schooling with frictional labour and marriage markets

Abstract

We present an equilibrium model with inter-linked frictional labour and marriage markets. Women’s flow value of being single is treated as given, and it captures returns from employment. Men can undertake a costly ex-ante investment in schooling. In the marriage market, women search sequentially for men characterised by wages, so they use a reservation value strategy. Single unemployed men conduct marital sequential search and, with an eye on the marriage market, also conduct a so-called constrained sequential job search. Given this setup, schooling enhances men’s marriage prospects as well as their labour market returns. In turn, women’s behaviour affects men’s schooling investment decision and their optimal job search strategy. We establish that for any given set of parameters, there exists a unique market equilibrium where a fraction of men get educated, and show that this fraction decreases if women’s labour market returns increase. We also examine the robustness of such an equilibrium.