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Divorce as Risky Behavior

Author

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  • Audrey Light

    () (Department of Economics, Ohio State University)

  • Taehyun Ahn

    () (Office for Labor Market Research, Korea Labor Institute)

Abstract

Given that divorce often represents a high-stakes income gamble, we ask how individual levels of risk tolerance affect the decision to divorce. We extend the orthodox divorce model by assuming individuals are risk averse, marriage is risky, and divorce is even riskier. The model predicts that conditional on the expected gains to marriage and divorce, the probability of divorce increases with relative risk tolerance because risk averse individuals require compensation for the additional risk inherent in divorce. To implement the model empirically, we use data for first-married women and men from the NLSY79 to estimate a probit model of divorce in which a measure of risk tolerance is among the covariates. The estimates reveal that a one-point increase in risk tolerance raises the predicted probability of divorce by 4.3% for a representative man and by 11.4% for a representative woman. These findings are consistent with the notion that divorce entails a greater income gamble for women than for men.

Suggested Citation

  • Audrey Light & Taehyun Ahn, 2007. "Divorce as Risky Behavior," Working Papers 07-06, Ohio State University, Department of Economics.
  • Handle: RePEc:osu:osuewp:07-06
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    References listed on IDEAS

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    Cited by:

    1. Audrey Light & Yoshiaki Omori, 2013. "Determinants of Long-Term Unions: Who Survives the “Seven Year Itch”?," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), pages 851-891.
    2. Philip S. Morrison & William A.V. Clark, 2016. "Loss aversion and duration of residence," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 35(36), pages 1079-1100, October.
    3. Philomena Bacon & Anna Conte & Peter Moffatt, 2014. "Assortative mating on risk attitude," Theory and Decision, Springer, vol. 77(3), pages 389-401, October.
    4. Maczulskij, Terhi & Böckerman, Petri, 2017. "Harsh Times: Do Stressors Lead to Labor Market Losses?," IZA Discussion Papers 10773, Institute for the Study of Labor (IZA).
    5. Shelly Lundberg, 2011. "Psychology and Family Economics," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(s1), pages 66-81, May.
    6. Park, Seonyoung, 2011. "Returning to school for higher returns," Economics of Education Review, Elsevier, vol. 30(6), pages 1215-1228.
    7. Shelly Lundberg, 2012. "Personality and marital surplus," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-21, December.
    8. Maria Paola & Francesca Gioia, 2017. "Does patience matter in marriage stability? Some evidence from Italy," Review of Economics of the Household, Springer, vol. 15(2), pages 549-577, June.

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