  Using CPS data for 1976 to 2022 we explore how wage inequality has evolved
for married couples with both spouses working full time full year, and its
impact on household income inequality. We also investigate how marriage sorting
patterns have changed over this period. To determine the factors driving income
inequality we estimate a model explaining the joint distribution of wages which
accounts for the spouses' employment decisions. We find that income inequality
has increased for these households and increased assortative matching of wages
has exacerbated the inequality resulting from individual wage growth. We find
that positive sorting partially reflects the correlation across unobservables
influencing both members' of the marriage wages. We decompose the changes in
sorting patterns over the 47 years comprising our sample into structural,
composition and selection effects and find that the increase in positive
sorting primarily reflects the increased skill premia for both observed and
unobserved characteristics.
