Marriage and Income Risk in the United Kingdom


The paper quantifies the insurance opportunities arising from marriage in the United Kingdom. Marriage can reduce individual net income risk through income risk pooling with a partner. However, if one partner faces higher income volatility related to certain socioeconomic characteristics, marriage can lead to an increase in net income risk for one of the partners. Firstly, I find that marriage generates a form of income risk insurance as single individuals face considerably higher levels of net income risk than those who are married. Secondly, the results indicate that the degree of marriage insurance depends on marital choice. Sharing the same socioeconomic background with a spouse is found to reduce levels of net income risk, compared to couples from different socioeconomic backgrounds. In addition, assortative couples face a lower probability of encountering permanent income shock. To test the robustness of these findings, a counterfactual exercise was created in the form of a synthetic dataset in which I randomise the couples based on their original marital choice. This controls for any endogeneity, for example, responses of labour supply. The test further supports my key finding.