Does marriage pay more than cohabitation?

Abstract

Purpose

– Empirical research has unambiguously shown that married men receive higher wages than unmarried, whereas a wage premium for cohabiters is not as evident yet. This paper aims to exploit the observed difference between the marital and the cohabiting wage premium in Germany to draw conclusions about the sources, typically explained by specialisation (e.g. husbands being more productive because their wives take over household chores) or selection (high earnings potentials being more attractive on the marriage market).