The author constructs a novel, quarterly measure of earnings inequality and document the following facts. First, shocks to productivity and government expenditure have significant effects on earnings inequality, while monetary policy shocks have little effect. Second, unanticipated innovations in earnings inequality, summarizing redistributive forces from the bottom to the top, substantially lower aggregate demand in a U-shaped manner. Finally, the power of stabilization policies increases with the level of inequality.

Information quality affects matching and marital outcomes. We show in a simple two-dimensional matching model that a noisier cue for one trait leads to a shift in sorting tradeoff toward the other, lowers average welfare but the impact is asymmetric. To test the predictions, we explore the repeal of mandatory premarital health examinations in China. The repeal, increasing health cue noise, is found to have reduced postmarital subjective well-being mainly through a reduction in child health associated with decreased sorting by health.