The marriage premium and compensating wage differentials

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Abstract
This paper proposes and tests an alternative explanation of the marriage premium that relies upon differences in workers' tastes and compensating wage differentials. A key assumption is that marital status proxies for the consumption of family goods — such as children; and that these are costly. Workers whose greater demands for family goods are taste-generated are shown to choose jobs that offer greater wage, and lesser nonpecuniary compensation. This creates an observed wage premium that has nothing to do with differences in workers' productivities. Supporting empirical evidence for this hypothesis is presented, including a reevaluation of previous studies.

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