Preparing for the worst: post-divorce instability risk and economic behaviour of households

Sehrish Usman

MPRA Paper from University Library of Munich, Germany

Abstract: Who thrives when alimony payments change? Restrictions on spousal alimony influence intra-family economic decisions by altering bargaining positions and raising concerns about post-divorce financial instability. Existing findings on restricted regimes are contradictory and need more clarity on the differential impact across heterogeneous households. This paper explores behavioural adaptations in labour supply and saving decisions of intact married partners in response to amendments in alimony reform in Germany. Using a difference-in-difference framework and longitudinal and retrospective datasets, I show that policy led to increased labour market participation of married women. However, behavioural responses vary significantly depending on the age cohort, family composition, duration of relationship, and income levels.

Keywords: Household Economics; Spousal bargaining; Intra-family Decisions; Saving; Labor Supply; Policy Reform (search for similar items in EconPapers)
JEL-codes: D13 D14 J12 J18 J22 (search for similar items in EconPapers)
Date: 2024-11-13, Revised 2024-11-27
New Economics Papers: this item is included in nep-eur and nep-lab
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