On February 27 and 28, the Milton Friedman Institute for Research in Economics sponsored its first workshop, "New Economics of the Family." In a two-day conference that attracted scholars from London, Paris, Madrid, and Tel Aviv, researchers presented models of economic decision making about marriage and within the family to better understand the underpinnings of educational choice, labor supply, income inequality, and economic growth. Organizers of this workshop included Pierre-André Chiappori of Columbia University, Christopher Flinn of New York University, and James Heckman from the University of Chicago. As noted in James Heckman's opening remarks, the workshop reflected the spirit of Milton Friedman's intellectual legacy by providing a forum to recognize new developments in economic theory and empirical work.
Rooted in Gary Becker's seminal work in A Treatise on the Family, the papers in this workshop presented economic models that examined a variety of important questions relating to both marriage and the family. For instance, how are one's educational choices influenced by concerns about finding a spouse who is a good match? How does marriage among people with similar attributes contribute to income inequality across households? What factors influence how resources and responsibilities are shared within a marriage? In several models, the "marriage market" is used as an analytical tool to predict how self-interested individuals find marriage partners. The models identify the important components that make the match attractive for both parties. Novel methods were proposed and implemented that allowed for flexibility in characterizing spousal preferences and their relative importance in both the decision to marry and in decision-making within a marriage. These models incorporated the role of opportunities outside of the marriage, including both pre-marriage alternatives such as remaining single or searching for other spouses and post-marriage options such as divorce.
Examination of the empirical implications of these models yielded new results on the effects of policy and on the forces underlying observed trends. By explicitly recognizing the alternatives to remaining in a given marriage, the "marriage market" models provided novel explanations for divorce settlement laws and for why there are large numbers of unmarried men and women in certain cultures, such as in Europe. Such models were used to study the determinants of the rise in the correlation between husband and wife earnings, to understand better the observed increase in income inequality across households and to explain the upward trend in investment in education by women, relative to men, in recent decades.
Other research quantified when investments in children are most potent in their effects on the development of their cognitive and non-cognitive skills. While early childhood investments are critical in the development of cognitive skills, investments in non-cognitive skills continue to be influential in adolescents. Finally, explanations were considered for the aggregate rise over time in the incidence of premarital sex based in part on improved contraceptives.
Gary Becker concluded the workshop by describing important directions for new research and in particular encouraging more empirical work on the aggregate effects of fertility. Becker emphasized the downward trend in fertility and attributed it to higher levels of education, a greater number of women entering the labor force, and higher divorce rates. He then discussed the range of effects that declining fertility has on the economy along with important policy ramifications.