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Simultaneity and selection in financial hardship and divorce

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  • Scott Drewianka

    (University of Wisconsin-Milwaukee)

  • Martin E. Meder

    (Nicholls State University)

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.

Suggested Citation

  • Scott Drewianka & Martin E. Meder, 2020. "Simultaneity and selection in financial hardship and divorce," Review of Economics of the Household, Springer, vol. 18(4), pages 1245-1265, December.
    • Handle: RePEc:kap:reveho:v:18:y:2020:i:4:d:10.1007_s11150-020-09518-7
    DOI: 10.1007/s11150-020-09518-7
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    References listed on IDEAS

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    Cited by:

    1. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," Research Papers in Economics 2023-06, University of Trier, Department of Economics.

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    Keywords

    Divorce; Income; Household; Family;
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