Assortative Mating and Wealth Inequalities between and within Households

Reinhard Schunck, GESIS
Philipp Lersch, University of Cologne

Positive assortative mating may be one cause of wealth inequalities, but this relationship has not been examined in previous research. In the current study we investigate assortative mating and wealth inequality within and between households in Germany. We draw on data from the German Socio-Economic Panel Study (SOEP; N=1,725 couples). We examine both partners’ personal wealth in newly-formed couples and compare the observed wealth distribution to counterfactual scenarios. We find that the bivariate correlation in personal wealth between both partners is about 0.21. Partners positively match on wealth beyond their assortative mating on age, education and income. We find that the Gini coefficient for between-household wealth inequality would be about 5 percent lower in the absence of positive assortative mating. We find that about 43 percent of overall wealth inequality is within households. The within-household gender gap in personal wealth would be about twice as large and negative under random matching for women at the bottom of the female wealth distribution. However, we find that women would have a substantial wealth advantage under random matching at the top of the female wealth distribution.

Since World War II, inequalities in economic wealth have increased in many (post-) industrialized societies. For instance, in the United States wealth inequality measured with the Gini coefficient increased from 0.80 in 1962 to about 0.87 in 2010. In Germany, the country case of the current study, the Gini for household wealth inequality increased from 0.63 to 0.69 between 1978 and 2003. Inequality in individual wealth in Germany was even higher with a Gini of 0.78 in 2002 and remained high throughout the 2000s until 2012. There is also evidence for considerable wealth inequality withinhouseholds.

Different explanations for increasing wealth inequalities have been proposed in the literature, but have not yet been conclusively evaluated. A relatively understudied explanation for wealth inequalities, which is of particular interest to demographers and sociologists, is related to demographic processes of family formation. If wealthy individuals assortatively mate with wealthy partners, the concentration of wealth in particular households may create greater wealth inequalities than would be observed if individuals would select partners randomly. Similar arguments have previously been made and tested for income inequality (Schwartz 2010), but have received scant attention regarding wealth.

By definition, more between-household inequality is associated with less within-household inequality if partners have more similar individual resources. The specific consequences of assortative mating for within-household inequality have received little attention in the literature, however, under the assumption of a unitary household model in which all resources are pooled and shared among household members. This is a critical gap in research, because a growing literature contests this assumption and argues that within-household inequalities may have serious consequences for the well-being of household members. In particular, women have often been found to have less access to household resources. This is also the case for wealth, where a nascent literature finds substantial within-household gender inequalities even within married couples to the disadvantage of women.

This study examines to which degree individuals assortatively mate on wealth and choose romantic partners with wealth levels similar to themselves. In addition, the study examines whether assortative mating by wealth is related to substantially different between- and within-household wealth inequalities compared to random matching. Thereby, we make three innovative contributions to the literature. First, to the best of our knowledge, no other study has examined matching on individuals’ own wealth. Previously, substantial positive assortative mating by parental wealth was found. However, we argue that additionally studying individuals’ own wealth at partnership formation early in the life course is crucial to understand economic inequalities across the life course. Second, we are the first to empirically assess whether assortative mating in wealth is sufficiently large to contribute to population-level wealth inequality. Third, we bring together literatures on assortative mating and within-household inequality by examining the within-household gender gap in wealth at partnership formation and to which degree this gap is shaped by assortative mating. Note that we study a relatively short observation period between 2002 and 2012 and, therefore, cannot directly test the contribution of assortative mating to historical changes in wealth inequality.

We draw on high-quality data from the German Socio-Economic Panel Study (SOEP; N=1,725 couples) and examine both partners’ personal wealth (all assets individuals solely and jointly own less their debts) of newly-formed couples within a two-year window after they moved together. We find that the bivariate correlation in personal wealth between both partners is about 0.21 at partnership formation with a Gini coefficient of 0.83 for between-household inequality. Partners positively match on wealth beyond their assortative mating on age, education and income. By simulating a counterfactual distribution of wealth based on randomly matched couples, we find that the Gini coefficient for between-household wealth inequality would be about 5 percent lower in the absence of positive assortative mating. Furthermore, we find that about 43 percent of overall wealth inequality is within households. Women have about EUR 28,900 less wealth than their partners at partnership formation. The within-household gender gap in personal wealth would be about twice as large and negative under random matching for women at the bottom of the female wealth distribution. However, we find that women would have a substantial wealth advantage under random matching at the top of the female wealth distribution.

Presented in Session 1113: Families and Households