California Center for Population Research

Evidence collected using the Panel Study of Income Dynamics (PSID) indicates that labor supply, saving, and marital decisions are strongly linked. This paper has two main goals. The first is to develop a model of household behavior that captures the empirical features of labor supply, saving, and marital choices. The second goal is to simulate the model using the PSID. The results indicates that the proposed model can match most of the features displayed by the data. They also suggest that the relationships between labor supply, saving, and marital status decision are important features of household behavior that should be considered by economists and policy makers when designing and implementing policies formulated to change the welfare of household members.