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Income effects of divorce in families with dependent children

Abstract

The Norwegian post-divorce transfer scheme for families with children guarantees minimum maintenance payments from the non-custodial to the custodial parent. We studied the economic effects of divorce in such families. When the mother has custody, she falls behind before maintenance payments. After adding these, the outcomes at the median are very similar for both parents, contrasting studies from other countries, but the risk of a drop in equivalized income is large.

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Notes

  1. Sources: OECD, Society at a glance 2001, Underlying data, Annex G: General context indicators, http://www.oecd.org, and Statistics Norway, http://www.ssb.no. In 1998, the Norwegian rate was at the OECD average, but in 1980–1995, it was higher. The number of divorces per 100 marriages for a given year is the percentage of divorces that would result during 60 years of marriage at the current divorce rates.

  2. For analyses of the effects of expected income and transfers on divorce, see, e.g. Johnson and Skinner (1986), Moffitt (1990), Hoffman and Duncan (1995), Konrad and Lommerud (1995), Nixon (1997) and Tjøtta and Vaage (2002).

  3. For male non-custodians, there was some discrepancy between reports from the mother and the father; the (non-custodial) fathers themselves reported 8 days per month. We use the lower number in the analysis.

  4. An alternative would be to follow individuals until marital breakup and observe earnings at some fixed interval after divorce. One advantage of our approach is that it allows a comparison of divorcees and non-divorcees. A disadvantage is that we may obscure some post-divorce earnings dynamics.

  5. We excluded 290 women and 282 men who subsequently re-married, as they are not entitled to the same transfers as those who do not and would have to be treated separately. Presumably, their outcomes would be most similar to those who stay married, as they do not necessarily suffer the same loss of spousal income.

  6. We had to base the “full-time” definition on earnings due to lack of reliable hours information. The chosen limits approximately correspond to the average earnings of hospital orderlies (men) and unskilled nursery workers (women).

  7. The purpose of this “transition benefit” is to support lone parents who are unable to uphold work due to childcare responsibilities, or who are undertaking education to improve their employability. The benefit may be combined with a small amount of labour earnings, which are then deducted. Child support from the non-custodial parent is also deducted. This benefit is subject to taxation.

  8. The authorities guarantee a minimum amount of support per year (NOK 11,760 in 1994). If the non-custodian’s income is insufficient to provide the minimum amount by applying the standard rate, the difference is paid by the government. In these cases, the support payments are decided discretionally, typically below the standard rate, with zero payments for those with very low incomes. In our calculations, we approximate this practice by adjusting the standard rate (q) as follows. Let a denote the minimum amount and m=a/q. For non-custodial income (y) less than 0.5 m, we set payments to 0. For 0.5my<m, we adjust the rate to q(y−0.5m)/0.5m. The received support is calculated as max(a, qy).

  9. For countries without an official poverty threshold, half of the median income is often used as a “poverty line”. We have chosen the politically decided minimum pension partly because it gives an idea of what is officially accepted as a minimum, but also because the median income in our selected sample would not be representative for the population.

  10. Another approach would be to estimate τ as a function of individual characteristics and then use imputed values in the analysis. However, that is not possible as the background information in the survey is not the same as in our sample.

  11. The estimated earnings equations are reported in Appendix, Table 7. The selection terms turned out to be insignificant. However, replacing the predictions with ordinary least significance (OLS) predictions hardly affected the results. For spouses, the potential income is based on average predictions grouped by age in 5-year intervals, as we have information on spouses’ age, but not their education and experience.

  12. We have also examined the effect of using predicted incomes (including the pseudorandom component) for all individuals, including those who actually work full time by our definition. The effect is modest, compressing the distribution of net incomes (D) slightly, mostly for men.

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Acknowledgements

The authors would like to thank the Norwegian Research Council for financial support, Grant No. 140127/530 (“Velferdsprogrammet”). The paper was completed while Bratberg was visiting the University of York, whose hospitality is gratefully acknowledged. We would also like to thank two anonymous referees for their helpful comments. A previous version of the paper was presented at the European Society for Population Economics (ESPE) 2000 conference in Bonn. The data used in this study were provided by the Norwegian Social Science Data Services (NSD). NSD is not responsible for the authors’ analyses.

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Correspondence to Sigve Tjøtta.

Appendix

Appendix

Table 6 Sensitivity of income dynamics to the time-with-non-custodial-parent parameter (τ)
Table 7 Earnings equations (two-step estimates)

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Bratberg, E., Tjøtta, S. Income effects of divorce in families with dependent children. J Popul Econ 21, 439–461 (2008). https://doi.org/10.1007/s00148-005-0029-8

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Keywords

  • Marital dissolution
  • Income changes
  • Child custody

JEL Classifications

  • J12
  • D31
  • I38