Simultaneity and selection in financial hardship and divorce

Scott Drewianka and Martin E. Meder ()
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Scott Drewianka: University of Wisconsin-Milwaukee
Martin E. Meder: Nicholls State University

Review of Economics of the Household, 2020, vol. 18, issue 4, No 15, 1245-1265

Abstract: Abstract While the correlation between financial hardship and divorce is well-documented, the causality remains unclear: it is plausible that divorce causes hardship, that hardship encourages divorce, or that unobserved factors produce both outcomes. We specify a model that nests these possibilities and estimate it using the National Longitudinal Survey of Youth 1979. Structural estimates indicate divorce reduces the income/needs ratio in women’s households by 0.35 standard deviations, though this is partially offset by apparent anticipatory labor supply responses. We also find a negative structural error correlation between divorce and income/needs ratios, but no evidence that a change in hardship causes divorce.

Keywords: Divorce; Income; Household; Family; J12; D10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11150-020-09518-7

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