Divorce as Risky Behavior
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.
|Date of creation:||Dec 2007|
|Date of revision:|
|Contact details of provider:|| Postal: 410 Arps Hall 1945 North High Street Columbus, Ohio 43210-1172|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kerwin Kofi Charles & Melvin Stephens, 2004.
"Job Displacement, Disability, and Divorce,"
Journal of Labor Economics,
University of Chicago Press, vol. 22(2), pages 489-522, April.
- Kotlikoff, Laurence J & Spivak, Avia, 1981.
"The Family as an Incomplete Annuities Market,"
Journal of Political Economy,
University of Chicago Press, vol. 89(2), pages 372-91, April.
- Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
- Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
- Chateauneuf, Alain & Cohen, Michele & Meilijson, Isaac, 2004.
"Four notions of mean-preserving increase in risk, risk attitudes and applications to the rank-dependent expected utility model,"
Journal of Mathematical Economics,
Elsevier, vol. 40(5), pages 547-571, August.
- Alain Chateauneuf & Michèle Cohen & Isaac Meilijson, 2004. "Four notions of mean preserving increase in risk, risk attitudes and applications to the Rank-Dependent Expected Utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00212281, HAL.
- Christy Spivey, 2010. "Desperation Or Desire? The Role Of Risk Aversion In Marriage," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 499-516, 04.
- Kimball, Miles S & Sahm, Claudia R & Shapiro, Matthew D, 2008.
"Imputing Risk Tolerance From Survey Responses,"
Journal of the American Statistical Association,
American Statistical Association, vol. 103(483), pages 1028-1038.
- Justin Wolfers, 2003.
"Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results,"
NBER Working Papers
10014, National Bureau of Economic Research, Inc.
- Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, vol. 96(5), pages 1802-1820, December.
- Wolfers, Justin, 2003. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," Research Papers 1819, Stanford University, Graduate School of Business.
- Saul D. Hoffman & Greg J. Duncan, 1995. "The Effect of Incomes, Wages, and AFDC Benefits on Marital Disruption," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 19-41.
- Evelyn Lehrer, 1996.
"Religion as a determinant of marital fertility,"
Journal of Population Economics,
Springer;European Society for Population Economics, vol. 9(2), pages 173-196, June.
- Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
- Robert A. Pollak, 2005. "Bargaining Power in Marriage: Earnings, Wage Rates and Household Production," NBER Working Papers 11239, National Bureau of Economic Research, Inc.
- Lucie Schmidt, 2008.
"Risk preferences and the timing of marriage and childbearing,"
Springer;Population Association of America (PAA), vol. 45(2), pages 439-460, May.
- Lucie Schmidt, 2007. "Risk Preferences and the Timing of Marriage and Childbearing," Department of Economics Working Papers 2007-03, Department of Economics, Williams College.
- Peters, H Elizabeth, 1986. "Marriage and Divorce: Informational Constraints and Private Contracting," American Economic Review, American Economic Association, vol. 76(3), pages 437-54, June.
- Claudia R. Sahm, 2007. "Stability of risk preference," Finance and Economics Discussion Series 2007-66, Board of Governors of the Federal Reserve System (U.S.).
- Evelyn Lehrer & Carmel Chiswick, 1993. "Religion as a determinant of marital stability," Demography, Springer;Population Association of America (PAA), vol. 30(3), pages 385-404, August.
When requesting a correction, please mention this item's handle: RePEc:osu:osuewp:07-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Slaughter)
If references are entirely missing, you can add them using this form.