Can economists explain the falling marriage rate?

It's springtime and, as the wedding season approaches, the question arises: Why are marriage rates at historic lows and the age of first marriage still rising? I've found the culprits: Blame low taxes and low inflation.

That's the conclusion of economists comparing marriage rates, inflation and taxes from around the world over several decades and looking at the spending habits of single people and married couples in the United States, Canada and Italy. The underlying research is filled with dense statistical analysis but builds from a simple premise. Individuals form household units, either through marriage, cohabitation or roommate arrangements, at least partly motivated by ­personal economics. Think of the old saying "two can live as cheaply as one" and you get the idea.

But their findings stand on its head the idea that leaving more money in individuals' pockets through low taxes and low inflation supports a person's decision to get married and start a family.

Their paper is an example of "new monetarist economics" that uses microeconomic data to test macroeconomic theories. The paper's authors, academic economists from the U.S., Canada and Australia, summarized their findings recently on the Minneapolis Federal Reserve Bank website in a paper titled "Macroeconomic Policy and Household Economics."

"Our idea," Randall Wright, one of the co-authors, explained in an e-mail, "is that if people live in a country or a decade with high inflation/taxation they will be less disposed to use markets and bring more economic activity in house — which for us means setting up a house and that translates into marriage (as well as roommates, living with parents, etc.)."

The researchers found that singles live much more "cash intensive" lifestyles, going out with friends and dating, than their married counterparts who enjoy the lower cost option of staying home without sacrificing companionship. Singles also rely more on markets to provide domestic services from cooking meals to laundry, activities that are more often brought "in-house" in a domestic arrangement like marriage. High income, and sales taxes and inflation are both "market frictions," in economic-speak, that make singles' cash-intensive lifestyles more expensive in real terms.

In the U.S. for example, they report that the average unmarried person, adjusting for household size and income, would carry more than twice the cash (2.27 times) than a married person. In Canada, the data show unmarried people hold 40 percent more cash and cash spending is 48 percent higher than for married people.

In oversimplified terms, a single person living alone carries more cash in his wallet, hits the ATM more often and keeps more of his assets in a low-interest checking account while married couples hold more of their wealth in assets such as mutual funds or real estate and have more income from lower taxed dividends and interest while their spending leans more to installment payments and credit cards.

So how do the researchers go from micro to macro, relating individual choices to larger economic forces? The connection is based on long-standing economic theories of why firms are created, drawing parallels to individual behavior. In each case, one faces a choice of either going into the market, or bringing some activity "in-house" when the time, cost and effort to find required goods and services outweigh the benefits.

An entrepreneur selling bread, for example, will hire production workers when a steady, predictable and consistent supply of loaves outweighs any cost savings he could get by buying bread from freelance bakers. Single adults can go into the market for everything from meals (dining out) and companionship (dating, going to the bars), to laundry and housekeeping. While it sounds terribly unromantic, the researchers' premise is that two people will set up housekeeping and get married when the costs of staying single outweigh the benefits.

Wright, a professor of economics at the University of Wisconsin-Madison and a consultant to the Minneapolis Fed, declined to speculate on any political implications of the research though he and his colleagues wrote that government fiscal and monetary policies "have profound influence on household formation and behavior."

Marriage rates and household formation have real impacts beyond their social and cultural significance. Policymakers have noted that with nearly two-thirds of the total economy driven by consumer spending, the delay in establishing households arguably puts a drag on economic growth both coming out of the recession and longer term.

Though they don't point to clear policy solutions, the new monetarist studies may shed light on these perplexing questions. Then again, it's springtime, when as the poet said, "a young man's fancy lightly turns to thoughts of love."

Brad Allen is a freelance journalist.