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Housing Decision With Divorce Risk

Author

Listed:
  • Marcel Fischer
  • Natalia Khorunzhina

Abstract

We build a life‐cycle model of housing decisions under divorce risk that predicts that the recent increase in divorce rates leads to reduced homeownership rates. The risk of a divorce triggers a precautionary‐savings motive. However, this motive is weaker when individuals can invest in owner‐occupied homes because homeowners' higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce‐risk‐induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle‐aged and older households when divorce risk goes up.

Suggested Citation

  • Marcel Fischer & Natalia Khorunzhina, 2019. "Housing Decision With Divorce Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(3), pages 1263-1290, August.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:3:p:1263-1290
    DOI: 10.1111/iere.12385
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    Cited by:

    1. Bram De Rock & Tom Potoms & Mariia Kovaleva, 2025. "Housing wealth, marital stability and labor supply: an intertemporal analysis," IFS Working Papers W25/13, Institute for Fiscal Studies.
    2. Michael Warlters, 2023. "Stamp Duty Reform and Home Ownership," The Economic Record, The Economic Society of Australia, vol. 99(327), pages 492-511, December.
    3. Khorunzhina, Natalia, 2021. "Intratemporal nonseparability between housing and nondurable consumption: Evidence from reinvestment in housing stock," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 658-670.
    4. Natalia Khorunzhina & Robert A. Miller, 2022. "2021 Klein Lecture: American Dream Delayed: Shifting Determinants Of Homeownership," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 3-35, February.
    5. Minsu Chang, 2024. "Changing Marital Transitions and Homeownership Among Young Households," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 52, pages 46-63, April.
    6. Gonzalo Paz-Pardo, 2024. "Homeownership and Portfolio Choice over the Generations," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(1), pages 207-237, January.
    7. Eerola, Essi & Harjunen, Oskari & Lyytikäinen, Teemu & Saarimaa, Tuukka, 2021. "Revisiting the effects of housing transfer taxes," Journal of Urban Economics, Elsevier, vol. 124(C).
    8. Hans Fehr & Maurice Hofmann & George Kudrna, 2025. "Pensions, Income Taxes, And Homeownership: A Cross‐Country Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(1), pages 143-174, February.
    9. Essi Eerola & Oskari Harjunen & Teemu Lyytikäinen & Tuukka Saarimaa, 2019. "Effects of Housing Transfer Taxes on Household Mobility," CESifo Working Paper Series 7750, CESifo.
    10. Minsu Chang, 2019. "A House Without a Ring: The Role of Changing Marital Transitions for Housing Decisions," 2019 Meeting Papers 514, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • 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
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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