Job Displacement, Disability, and Divorce

This paper examines how job displacement and physical disability suffered by a spouse affects the probability that the person's marriage ends in divorce. According to the standard economic model of marriage, the arrival of new information about a partner's earning capacity that a negative earnings shock conveys might affect the gains that the couple believes it will receive from remaining married. Shocks may therefore affect divorce probability. Little previous work has explored this issue. The few efforts that exist use no explicit measures of earning shocks. Using the Panel Study of Income Dynamics, this paper finds an increase in the probability of divorce following a spouse's job displacement but no change in divorce probability after a spousal disability. This difference casts doubt on a purely pecuniary motivation for divorce following earnings shocks, since both types of shocks exhibit similar long-run economic consequences. Furthermore, the increase in divorce is found only for layoffs and not for plant closings which suggests that information conveyed about a partner's non-economic suitability as a mate due to a job loss may be more important than the financial losses in precipitating a divorce.

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