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Stand together or alone? Family structure and the business cycle in Canada

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Abstract

In this paper we examine the relationship between business cycle fluctuations and family formation and structure, using Canadian vital statistics and Labour Force Survey data. Similar to US studies, we find that a 1 percentage point increase in the unemployment rate of men is associated with a 13 % decline in the number of marriages formed per thousand single females each quarter. Unlike US studies, we do not find a significant relationship between unemployment rates and aggregate flows into divorce. Using stock measures of marital status and family type, we show that the importance of the business cycle varies substantially by age group. Among 25–44 year olds, there is a significant increase in single parents with children under 18 when unemployment rates rise. Among 35–54 year olds, there is a significant increase in those living alone. There is some evidence of elderly parents joining the households of 45–54 year olds and young adults (18–24) remaining with their single parents during recessions. Overall, the observed decline in marriages during recessions appears driven by a decline in remarriages rather than a decline in first marriages.

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Notes

  1. Earlier studies based on time series data found a positive correlation between the unemployment rate and divorce rates (including Kawata (2008), Huang (2003) and South (1985) for divorce rates in Japan, Taiwan and post-war US, respectively).

  2. A more detailed exposition of the model is available from the authors upon request and is available at http://www.tammyschirle.org/research/recession_marriage.html until at least March 2015. Some parts of the model’s structure are adopted from Browning et al. (2011, Ch. 10). Note that Keeley (1977) provides an early application of search models to the marriage market, with a focus on the decision to enter the marriage market, the duration of search, and the importance of individual characteristics for the timing of first marriage.

  3. The importance of job separation rates depends on initial conditions. In the Canadian context, the majority of individuals are employed.

  4. On this point, the comparative statics of the model are not straightforward. Details are available as per footnote 2.

  5. The annual number of divorces by province is found in Statistics Canada Cansim Table 053-0002. The quarterly number of marriages is found in Statistics Canada Cansim Table 053-0001.

  6. The denominator was chosen to be consistent with Schaller (2012), one of the US studies most comparable in methods to the present study. As Statistics Canada does not publish a consistent population series at this level on a quarterly basis, we construct our estimates of the number of single females from the LFS. Note the LFS survey weight design is based on the Canadian Census and our resulting marriage rates closely match those available for recent years (Statistics Canada Cansim Table 101-1008).

  7. See Statistics Canada (2011) for more details. In 2012 there were 55 Employment Insurance economic regions in Canada’s 10 provinces.

  8. We note that the NBER’s Business Cycle Dating Committee uses several measures to date peaks and troughs, including real GDP, employment and real income (described at http://www.nber.org/cycles/recessions.html). The NBER notes that unemployment rates are often a leading indicator of business cycle peaks (increasing before the peak occurs) and a lagging indicator of business cycle troughs. Conceptually, real GDP could be a useful measure to consider, but provincial data is not available for monthly or quarterly frequencies.

  9. The age-province-year-month panel data set has 17,280 observations. The cell sizes for the constructed monthly marriage and divorce rates average 1774 observations, with a minimum of 107 observations (occurring for PEI, Canada’s smallest province) and a maximum of 7,648 observations.

  10. There were also changes in the treatment of same-sex relationships in 1999. Until September 1999, respondents reporting themselves to be in a same-sex marriage or common-law union would be recoded by Statistics Canada as single individuals. Since September 1999, these individuals are coded as married or common-law. We do not see a significant change in marriage or common-law rates as a result of this change. Public use data files do not allow us to separately identify same-sex and opposite-sex relationships. In Canada, same-sex unions were first legally recognized by Ontario in 2003 and same-sex marriage was legalized across Canada in 2005.

  11. Legal definitions of common-law unions vary by province.

  12. In Canada, most common-law relationships that have lasted at least 1 year are generally treated the same as legal marriages in terms of child custody or taxation. Upon separation, however, legal claims for the division of assets or property are typically difficult and expensive, as rights are held with the individual that legally purchased the asset. For longer relationships, spousal support may be required upon separation.

  13. Note the marriage and divorce rates constructed in this study are consistent with available rates from Statistics Canada. (Statistics Canada Cansim Table 101-1008 provides marriage rates for 2000–2004 and Table 101-6505 provides divorce rates for 2004 and 2005).

  14. See Douglas (2006) for a description of the 1985 Divorce Act. In the statistical analysis that follows, this type of nation-wide change in legislation is controlled for with the inclusion of year fixed effects in the models.

  15. In 1997 new child support guidelines were imposed in the Divorce Act, increasing formal child support agreements. Peters et al. (2004) present evidence that such measures will improve child support establishment and collection, changing the costs of divorce. In the statistical analysis that follows, this type of nation-wide change in legislation is controlled for with the inclusion of year fixed effects in the models.

  16. To check the consistency of our stock and flow measures, we compared our 2001–2003 provincial estimates of married women at time t to estimates of the number of married women at t − 1 plus flows into marriage at t less flows into divorce at t. As expected, the latter is almost always slightly larger (by 11 % on average) as separations are not accounted for. We thank an anonymous referee for suggesting this test.

  17. It is worth noting that the portion of individuals married or common-law in Quebec is similar to other provinces and trends in a similar way. However, couples in Quebec are much more likely to be common-law rather than legally married. See also footnote 21.

  18. According to Cansim Table 101-1002.

  19. In 2011, 85 % of individuals in ‘other’ families were never married. Only 3% were divorced or separated. Unfortunately, limited information in the LFS prevents reliable characterization of other family members so we cannot confirm how many are living with parents.

  20. Similar patterns are documented in Ariizumi and Schirle (2012), although they present unemployment rates representing both sexes age 15 and over, as defined by Statistics Canada.

  21. We cannot strictly interpret this effect as causal as there remain potential endogeneity issues. For example, it is possible that a change in marital stocks for unobserved reasons not captured by the fixed effects or provincial trends could influence the unemployment rate. Also, we are not able to account for possible non-linear temporal patterns in the male earnings structure that differ across provinces and are not captured by provincial trends or nation-wide year and quarter effects. We thank anonymous referees for their suggestions regarding this limitation of our study.

  22. As Quebec residents have a lower tendency to be legally married, we checked whether results for divorce flows were different when Quebec observations were excluded from the panel. The coefficients are similar and are not statistically significant when excluding Quebec. These results are available from the authors upon request.

  23. We also derived stock estimates based on quarterly measures. Results for marriage are not statistically significant. Results for divorce are similar to that described in the following paragraphs.

  24. We included four lags. Coefficients on the contemporaneous unemployment rate was −0.044 and the previous month was −0.013. Earlier lags were not significantly different from zero. These results are available from the authors upon request.

  25. Based on 2007 population estimates (Statistics Canada Cansim tables 051-0001 and 051-0010).

  26. Using the November 1999–December 2011 subsample, the effect of the unemployment rate on married/common-law stocks is much larger (the coefficient is −0.1231). Results for divorce are very similar to those presented in Table 3.

  27. The effect on divorce is similar, however there appears to be some lagged effect of unemployment on separation. These results are available from the authors upon request.

  28. These estimates are available from the authors upon request.

  29. Based on authors’ tabulations from the LFS.

  30. For the dependent variable we used the number of live births per woman age 25–29, 1980–2005, from Cansim Table 102-4503.

  31. Arguably, the observed reduction in remarriage rates among single parents could have negative implications for child welfare. However, the implications for child welfare would depend on the quality of matches that would otherwise be formed. If bad remarriages are avoided, this could have a positive effect on children. Welfare implications require further research.

  32. See for example Blank and Hanratty (1993) for a Canada-US comparison.

  33. Important for this relationship, there are several income support programs that effectively have marriage “penalties”. See for example Baker et al. (2004).

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Acknowledgments

This project was funded in part by the Wilfrid Laurier University Economics Freure Student Assistantship Fund. The authors would like to thank Francisco Gonzalez, Shoshana Grossbard, Aloysius Siow, Frances Woolley and anonymous referees for their comments and suggestions.

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  1. Department of Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, ON, N2L 3C5, Canada

    Hideki Ariizumi, Yaqin Hu & Tammy Schirle

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  1. Hideki Ariizumi
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Correspondence to Tammy Schirle.

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Ariizumi, H., Hu, Y. & Schirle, T. Stand together or alone? Family structure and the business cycle in Canada. Rev Econ Household 13, 135–161 (2015). https://doi.org/10.1007/s11150-013-9195-8

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