The Nonlinear Linkage Between Earnings Homogamy and Earnings Inequality Among Married Couples

Abstract

Abstract More married couples today consist of two high-earning or two low-earning partners (i.e., earnings homogamy), which leads to greater earnings inequality in married-couple families. Surprisingly few studies have examined this relationship by earnings level, leaving open the question of whether the increase in earnings homogamy at each level of earnings contributes equally to between-couple earnings inequality. I address this question using data on urban China during 1988–2013. Changes in earnings homogamy account for 6% to 11% of the increase in between-couple inequality, but importantly, decomposition reveals that 57% to 68% of the overall impact is driven by the growing earnings homogamy among the top 20% of husbands and their wives. I reach the same finding by replicating the analyses using data from the United States. Two explanations account for this finding: (1) earnings homogamy has increased more among high earners; and (2) all else being equal, increases among high earners are mechanically more influential in shaping the level of between-couple inequality. These findings have important theoretical and policy implications.