The Dual Local Markets: Family, Jobs, and the Spatial Distribution of Skills

We study how the interactions between the local labor market and the local marriage market determine the spatial distribution of economic activities. We develop the first spatial equilibrium model with endogenous marriage formation. Calibrating the model to U.S. cities, we find that despite strong positive assortative matching, marriage is a force of spatial dispersion. Endogenous, heterogeneous returns from local marriage markets are the key driver of this result. Through the lens of the model, the secular decline in the preference for marriage, the increase in labor force participation among women, and the narrowing gender pay gap together explain between a third and a half of the spatial divergence in the U.S. between 1960 and 2000.