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 an 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, and in that which has no explicit measures of earning shocks were used. Using the Panel Study of Income Dynamics, this paper finds a short-term increase in the probability of divorce following a spouse’s job displacement but no change in divorce probability after a spousal disability. An important reason for the difference across the two types of shocks appears to be that certain types of job loss signal information about a partner’s non-economic suitability as a mate.