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.

[An econometric problem in estimating models of occupational choice is that the agents' forecasts of future wages and occupational tenure are unobservable. This paper solves the problem by assuming that agents have rational expectations and by considering the effects of arbitrage both within and between cohorts. The solution consists of two time series regressions of the demand and supply functions of entrants into an occupation. From these regressions one obtains estimates of the rate of return to education, the direct cost of education, and other parameters that influence the market. The model was estimated with data from the market for lawyers.]

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 model's predictions are consistent with observed gender roles.

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.

The probability that an unskilled worker can be successfully trained or screened to be a manager depends on the effort of the firm. With positive hiring costs, a firm prefers to train/screen its own managers. However, the optimal size of the firm for productive efficiency may conflict with efficient managerial husbandry. How a firm copes with the above constraint generates stochastic layoffs, lateral mobility, promotions, diverse earnings profiles, fast-track jobs, and up-or-out rules.

Liquidity considerations will limit the number of markets in a competitive economy. Welfare implications are ambiguous. Since liquidity is a positive externality, there may be too little liquidity per market at a noncooperative equilibrium and too many markets compared to the surplus-maximizing market structure. But liquidity is also self-reinforcing. Given an existing equilibrium, new markets may not open because nobody wants to use a new market with low liquidity. There may be too few markets to achieve efficiency and new markets will not open. A nondiscriminating monopolist will operate smaller and more numerous markets compared to optimality as well as to the equilibrium of independent auctioneers.

We combine classic occupational choice (Roy model) and frictionless matching (following Sattinger) to explain earnings by occupation and firm in a way that is consistent with double assignment. In our model, within-firm inequality is globally nonzero whenever there is asymmetry in the revenue function or the occupational skill distribution across occupations. Occupational earnings overlap each other, and, unlike in the Roy model, the distributions of potential earnings are endogenous. In line with recent empirical findings on earning decomposition, skill-biased technical change increases within-firm inequality mostly among high-wage firms and not among low-wage firms.

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.

Across states, there is little correlation between a state’s marriage rate or cohabitation rate and own population. Within states, there is a positive (no) correlation between a state’s marriage (cohabitation) rate and its population growth rate. The Cobb-Douglas marriage matching function (CDMMF), which extends the Choo-Siow MMF to include peer effects, can rationalize these correlations. The model is easy to estimate. The CDMMF is estimated using panel data across US states from 1990 to 2010. The estimated model replicates the above scale effects. These effects are not sufficient to explain the large recent declines in the gains to marriage.