The Role of Domestic Abuse in Labor and Marriage Markets: Observing the Unobservables

In this paper we study the effects of abusive behavior on the labor force and marital status decisions of women. Using a unique Canadian data set on domestic violence, we estimate the effects of abuse on the marital history as well as current employment using a sequential, multi-state model. In our model, spousal abuse affects labor supply through decreases in utility from leisure as well as through reductions in productivity at work and hence the market wage. In addition, abuse is treated as an initially unobserved spousal characteristic that plays a role in the divorce decision, which in turn influences labor supply. Our analysis reveals three main findings. First, the effects of domestic abuse on employment differ across marital histories. Employment is decreasing in the presence of abuse in current and past marriages for married and divorced women, respectively, consistent with a health effect on the wage. In contrast, remarried women are more likely to work if abused in the current, but not the past, marriage. Second, domestic abuse is a dominant factor in the divorce decision, which in turn is a major determinant of employment. Finally, standard economic information such as age and education plays a minor role in the divorce decision relative to the abuse-related information.