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Lucky in Life, Unlucky in Love? The Effect of Random Income Shocks on Marriage and Divorce

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Author Info
Mark L. Hoekstra
Scott Hankins
Abstract

Economists have long been interested in the extent to which marriage and divorce decisions are affected by economic resources. For married couples, an increase in resources can either provide a stabilization effect or, alternatively, can enable divorce by allowing the couple to overcome the costs associated with divorce. Similarly, while economic theory predicts that an increase in resources makes an unmarried individual more attractive to potential marriage partners, it may also make single life more attractive. However, empirically determining the extent to which marriage and divorce are normal goods is difficult due to a lack of exogenous pure income shocks. To overcome that problem, we compare the marital decisions of recipients of large cash prizes to those of small cash prize winners. We do so by exploiting a unique data set in which lottery winners from Miami-Dade and Palm Beach counties are linked to public record marriage and divorce filings from 1985 to 2007. We find no evidence that positive income shocks of $25,000 to $50,000 cause statistically significant or economically meaningful changes in either marriage or divorce rates despite relatively small standard errors. Results are similar across the gender, race, and income level of the lottery winners. Importantly, we also find no evidence that large positive income shocks affect migration out of the county.

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Paper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 329.

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Date of creation: Nov 2007
Date of revision: Jun 2008
Handle: RePEc:pit:wpaper:329

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