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The Risk of Divorce and Household Saving Behavior

Author

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  • Libertad González
  • Berkay Özcan

Abstract

We analyze the causal impact of an increase in the risk of marital dissolution on the saving behavior of married couples. We use the legalization of divorce in Ireland in 1996 as an exogenous shock to the risk of divorce. We propose several comparison groups (unaffected by the law change) that allow us to use a difference-in-differences approach. Our findings suggest that the legalization of divorce led to a significant increase in the propensity to save by married individuals, which is consistent with individuals saving more as a response to the increase in the probability of marital breakup.

Suggested Citation

  • Libertad González & Berkay Özcan, 2013. "The Risk of Divorce and Household Saving Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 404-434.
  • Handle: RePEc:uwp:jhriss:v:48:y:2013:ii:1:p:404-434
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    References listed on IDEAS

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    1. Betsey Stevenson, 2007. "The Impact of Divorce Laws on Marriage-Specific Capital," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 75-94.
    2. Shelly Lundberg & Elaina Rose, 1998. "The Determinants of Specialization Within Marriage," Discussion Papers in Economics at the University of Washington 0048, Department of Economics at the University of Washington.
    3. Browning, Martin, 2000. " The Saving Behaviour of a Two-Person Household," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(2), pages 235-251, June.
    4. Luis Cubeddu & Jose-Victor Rios-Rull, 1997. "Marital risk and capital accumulation," Staff Report 235, Federal Reserve Bank of Minneapolis.
    5. Bargain, Olivier & González, Libertad & Keane, Claire & Özcan, Berkay, 2012. "Female labor supply and divorce: New evidence from Ireland," European Economic Review, Elsevier, vol. 56(8), pages 1675-1691.
    6. Saku Aura, 2002. "Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining," CESifo Working Paper Series 801, CESifo Group Munich.
    7. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
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    9. Johnson, William R & Skinner, Jonathan, 1986. "Labor Supply and Marital Separation," American Economic Review, American Economic Association, vol. 76(3), pages 455-469, June.
    10. Laurence R. Iannaccone, 1998. "Introduction to the Economics of Religion," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1465-1495, September.
    11. González, Libertad & Viitanen, Tarja K., 2009. "The effect of divorce laws on divorce rates in Europe," European Economic Review, Elsevier, vol. 53(2), pages 127-138, February.
    12. Papps, Kerry L., 2006. "The Effects of Divorce Risk on the Labour Supply of Married Couples," IZA Discussion Papers 2395, Institute for the Study of Labor (IZA).
    13. Lommerud, Kjell Erik, 1989. "Marital Division of Labor with Risk of Divorce: The Role of "Voice" Enforcement of Contracts," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 113-127, January.
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    15. Betsey Stevenson, 2008. "Divorce Law and Women's Labor Supply," NBER Working Papers 14346, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Filippo Pericoli & Luigi Ventura, 2012. "Family dissolution and precautionary savings: an empirical analysis," Review of Economics of the Household, Springer, vol. 10(4), pages 573-595, December.
    2. Ortigueira, Salvador & Siassi, Nawid, 2013. "How important is intra-household risk sharing for savings and labor supply?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 650-666.
    3. repec:ucp:jlawec:doi:10.1086/692806 is not listed on IDEAS
    4. Bargain, Olivier & González, Libertad & Keane, Claire & Özcan, Berkay, 2012. "Female labor supply and divorce: New evidence from Ireland," European Economic Review, Elsevier, vol. 56(8), pages 1675-1691.
    5. Marie Boltz & Isabelle Chort, 2015. "The Risk of Polygamy and Wives Saving Behavior," PSE Working Papers halshs-01183453, HAL.
    6. Alessandra Voena, 2010. "Yours, Mine and Ours: Do Divorce Laws affect the Intertemporal Behavior of Married Couples??," 2010 Meeting Papers 1329, Society for Economic Dynamics.
    7. Libertad González Luna & Tarja Viitanen, 2008. "The long term effects of legalizing divorce on children," Economics Working Papers 1122, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Alessandra Voena, 2011. "Yours, Mine and Ours: Do Divorce Laws Affect the Intertemporal Behavior of Married Couples?," Discussion Papers 10-022, Stanford Institute for Economic Policy Research.
    9. Helmuth Cremer & Pierre Pestieau & Kerstin Roeder, 2015. "United but (un)equal: human capital, probability of divorce, and the marriage contract," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(1), pages 195-217, January.
    10. Angelini, Viola & Bertoni, Marco & Stella, Luca & Weiss, Christoph T., 2016. "The Ant or the Grasshopper? The Long-term Consequences of Unilateral Divorce Laws on Savings of European Households," IZA Discussion Papers 10363, Institute for the Study of Labor (IZA).
    11. Jennifer Roff, 2017. "Cleaning in the Shadow of the Law? Bargaining, Marital Investment, and the Impact of Divorce Law on Husbands' Intrahousehold Work," Journal of Law and Economics, University of Chicago Press, vol. 60(1), pages 115-134.
    12. World Bank, 2013. "Montenegro Gender Diagnostic," World Bank Other Operational Studies 21827, The World Bank.
    13. Marie Boltz & Isabelle Chort, 2015. "The Risk of Polygamy and Wives' Saving Behavior," Working Papers DT/2015/12, DIAL (Développement, Institutions et Mondialisation).
    14. Yazeed Abdul Mumin & Abubakari Razak & Paul Bata Domanban, 2013. "Analysis of Household Heads? Decision-To-Save with Financial Institutions in Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(11), pages 1466-1478, November.
    15. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2009. "Marital Risk, Family Insurance, and Public Policy," SOEPpapers on Multidisciplinary Panel Data Research 226, DIW Berlin, The German Socio-Economic Panel (SOEP).

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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