Selection vs. Specialization: The Impact of Legal Marriage on Adult Earnings in Sweden

Anders Björklund, Swedish Institute for Social Research
Donna K. Ginther, University of Kansas
Marianne Sundström, Swedish Institute for Social Research

A male marriage wage premium has been found in many studies. The source of the marriage premium is debated – does it come from selection or from specialization? We use data on the earnings in 1985 and 1990 of married or cohabiting parents of a random sample of 120,000 children born in 1974-87 in Sweden. Since identifying the causal effect of marriage on earnings is complicated by the selection problem we use a natural experiment, namely the marriage boom in Sweden in the last two months of 1989, created by the reform of the widow’s pension system from January 1990 to identify the effect. We find a large marriage premium for men (15%) and an equally large marriage penalty for women (15%) after controlling for fixed effects and the marriage natural experiment. We attribute these wage changes to differences in labor supply resulting from marriage.