Aloysius Siow

WHO MARRIES WHOM AND WHY

This paper proposes and estimates a static transferable utility model of the marriage market. The model generates a nonparametric marriage matching function with spillover effects. It rationalizes the standard interpretation of marriage rate regressions and points out its limitations. The model was used to estimate U.S. marital behavior in 1971/72 and 1981/82. The marriage matching function estimates show that the gains to marriage for young adults fell substantially over the decade. Unlike contradictory marriage rate regression results, the marriage matching function estimates showed that the legalization of abortion had a significant quantitative impact on the fall in the gains to marriage for young men and women.

Testing the Response of Consumption to Income Changes with (Noisy) Panel Data

This paper tests the rational expectations lifecycle model of consumption against (1) a simple Keynesian model and (ii) the rational expectations lifecycle model with imperfect capital markets. The tests are based upon the relative responsiveness of consumption to income changes which can be predicted from past information and income changes which cannot be predicted. Since there is strong evidence that panel data contains substantial measurement error, the tests are especially constructed to allow for measurement error in the income process. They also allow for more general income processes than have been considered to date in the literature. The results reject the Keynesian model and generally support the lifecycle model, although the tests are not sufficiently precise to rule out the possibility that some households are liquidity constrained. Measurement error does have a strong influence on the relationship between consumption and income. When it is ignored our tests do not reject the Keynesian model. We show that consideration of measurement error may also reconcile differences in the results of Hall and Mishkin (1982) and Bernanke(1984). Nevertheless, our most important conclusion is that Hall and Mishkins, Bernankes, and Hayashis (198 ) qualitative finding that the vast majority of households obey the lifecycle model is not an artifact of failure to account for measurement error in the income data.

Competing Premarital Investments

This paper studies premarital parental investments in children’s wealth, where spousal wealth is a public good in marriage. By investing in their children’s wealth, parents increase the wealth of their children and the quality of the spouses that their children can marry. In large marriage markets, the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient. Marriage market competition also increases investments in small marriage markets relative to no competition, but equilibrium investments are not efficient.

Does Federal Research Funding Increase University Research Output

Abstract This paper estimates the effects of federal research funding on research outcomes at 68 research universities. We provide a new interpretation of the instrumental variable estimate of the coefficient in a regression of the output of an institution on an input. Absent parameter heterogeneity, it captures the total change in output when an institution obtains an additional unit of the input that may be correlated with the other inputs that affect the output measure. Our instrument for research funding is alumni representation on U.S. Congressional appropriations committees. Our results suggest an increase of

Differential Fecundity, Markets and Gender Roles

1 million in federal research funding (1996

Up-or-Out Rules in the Market for Lawyers

) to a university results in 10 more articles and 0.2 more patents. The change in citations per article is negative but very small and imprecisely measured. As a first approximation, increasing federal research funding on the margin results in more, but not necessarily higher quality, research output.

On the Job Screening, up or out Rules, and Firm Growth

Women are fecund for a shorter period of their lives than men. This paper investigates how differential fecundity interacts with marriage, labor, and financial markets to affect gender roles. The main findings of the paper are as follows: (i) Fecund women are relatively scarce. Men will behave differently than women in response to this scarcity. In the most fundamental way, demand and supply conditions in the marriage market affect gender roles. (ii) Differential fecundity does not have any market‐invariant gender effect. Gender roles depend on the way in which marriage, labor, and financial markets interact. (iii) Gender differences in the labor market can occur without corresponding differences in labor market opportunities, productivities in child rearing, or social norms. (iv) With uncertainty in human capital accumulation and no insurance against this uncertainty, the models predictions are consistent with observed gender roles.

Testing Becker’s Theory of Positive Assortative Matching

We examine how up-or-out rules operate as a screening device in the market for lawyers. Using data on large New York law firms, we show that firm growth is a slow and uncertain process because performance as an associate is not an especially informative signal about whether a lawyer will make a good partner and because the costs of mistaken promotion are relatively high. A newly hired associate is unlikely to be a suitable partner and the screening process is relatively imprecise. Firm growth therefore contributes between 5%-7% of the present value of profits of a law firm.

Are First Impressions Important in Academia

This paper uses on-the-job screening to derive a stochastic and dynamic model of hiring, promotion, and dismissal policies, and their impact on total firm employment and output. The model provides an explanation of the up-or-out rule observed in many organizations. It also provides an explanation for a cost-of-adjustment mechanism for the stock of human capital in a firm.(This abstract was borrowed from another version of this item.)

Estimating a marriage matching model with spillover effects.

In a stochastic Becker marriage model (Choo and Siow), supermodularity of the match output function implies stochastic positive assortative matching (PAM): the equilibrium marriage matching distribution has all positive local log odds ratios or is totally positive of order 2 (TP2). The Choo-Siow model rationalizes the practice of studying PAM independent of population vectors and marriage rates and conditional on other spousal characteristics. Using white married couples in their 30s from the 2000 US Census, spousal educational matching generally obeyed TP2. Between 1970 and 2000, there was no general increase in PAM. There was increased homogamy in spousal education matching.