Abstract
This paper investigates the impact of a surging housing market on marital sorting. Our empirical analysis shows that there is increasing assortativeness on original family background in response to housing price appreciation. That is, for husbands, when the down payment doubles, one more year of paternal schooling predicts a marriage in which the father-in-law’s schooling is 0.057 year greater than in a scenario in which the down payment does not increase. The rising assortativeness could exacerbate the already expanding inequality caused by the booming housing market. In addition to the benchmark analysis, we find that a divorce reform, which awards assets proportionate to the shares the spouses paid for the initial down payment (rather than awarding equal shares) upon divorce, alleviates assortativeness. The evidence suggests that joint investment in housing is likely to be a significant consideration in marital sorting.
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