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Divorce and financial well-being

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  • Fischer, Marcel
  • Khorunzhina, Natalia

Abstract

Using a life-cycle model of household consumption and investment under family transitions, we investigate the long-run financial outcomes of divorces. We find divorce leads to a reduction in wealth, and the loss is larger for higher-educated women. Earlier fertility and a smaller parenthood penalty for women with only a high school diploma result in negative effects of divorces fading away by age 45, whereas for college-educated women, the same is achieved a decade later because of later fertility and a stronger parenthood penalty. Reduced economies of scale, switching to a single-person income, and losing wealth protection within marriage have the strongest impact on the divorced household economy.

Suggested Citation

  • Fischer, Marcel & Khorunzhina, Natalia, 2025. "Divorce and financial well-being," arqus Discussion Papers in Quantitative Tax Research 292, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:323204
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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