Department of Economics

The rise in the divorce rate over the past 40 years is one of the fundamental changes in American society. A seemingly ever-increasing number of women and children spend some fraction of their life in single female-headed households, leading many to be concerned about the economic circumstances of these women their and children. Estimating the cause-to-effect relationship between marital dissolution and female economic status is complicated because the same factors that increase marital instability may also affect the economic status and labor market behavior of women. We propose an instrumental variables solution to this problem based on the sex of the firstborn child. This strategy exploits the fact that the sex of the firstborn child is random and the fact that marriages are less likely to survive following the birth of girls as opposed to boys. Our IV estimates cast doubt on the contention that marital instability causes large declines in woman’s economic status. Once the negative selection into divorce is accounted for, we find that women who have experienced marital dissolution have considerably higher levels of personal income and annual wages than women who remain married. At the same time we find little evidence of differential poverty rates and equivalized household incomes among ever-divorced women and never-divorced women. We further show that the higher wages of ever-divorced women mostly reflect increased labor supply intensity (hours and weeks of work) of woman who experienced marital dissolution.