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Divorce and the cost of housing: evidence from Iran

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Abstract

Divorce trend in Iran has become a serious social concern that is suspected of being influenced by rising housing costs in an oil-based economy. Iran has the highest growth rate of divorce among Islamic countries in the Middle East and North Africa region. Using data from 30 provinces of Iran from 2002 to 2010, this paper examines the relationship between housing costs (house prices and rents) and divorce rate, controlling for other macroeconomic variables such as unemployment, inflation, and education in addition to regional, cultural, traditional, and conventional attitudes toward divorce. By applying panel fixed-effects and dynamic generalized methods of moments methods, our results suggest that increases in housing costs erode marital stability in Iran. Our main results are also supported when we focus on the shocks in housing costs, using the Vector autoregressive based impulse response and variance decomposition analyses of divorce rates at the national level from 1982 to 2010.

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Notes

  1. http://www.mehrnews.com/detail/News/2010874. See also BBC Persian report entitled “13 % increases in divorce in Iran at the first 6 months of the year”, 28 October 2013, Available at http://www.bbc.co.uk/persian/iran/2013/10/131028_nm_divorce_marriage_statistic.shtml [Accessed 20 December 2013] [In Persian]. And also a report of the New York Times about skyrocketing rates of divorce in Iran: http://www.nytimes.com/2010/12/07/world/middleeast/07divorce.html?pagewanted=all&_r=0.

  2. Also see “Endless appetite in land grabbing in Mazandaran” available at the http://alef.ir/vdccoiqi42bqx08.ala2.html?202498 [Accessed 3 January 2013] [In Persian] and Hamshahri-Online report on “incidence of 35,000 land grabbing cases in (Iran)”. Available at http://hamshahrionline.ir/details/240701 [Accessed 3 January 2014] [In Persian].

  3. Economists and observers have mentioned several factors that pushed house prices and rents up in Iran in last decade such as: excess demand in housing market (particularly investment demands); speculation of real estate agents; high level of inflation; Dutch disease; increases in costs of construction due to reduction of subsidies from goods and services during Ahmadinejad presidency as well as sanctions imposed on the economy of Iran by the United Nations (UN), the United States (U.S.) and European Union; increases in land prices; and currency crisis (e.g., Hadavandi et al. 2011; Abbasinezhad and Yari 2009; Farzanegan 2013a). Also see BBC report “Economic sanctions and currency crisis increased house prices”, Available at: http://www.bbc.co.uk/persian/business/2013/04/130414_l57_iran_housing_increased_price.shtml [accessed 29 September 2013] [In Persian].

  4. Researches in Iran have found that children whose parents have divorced experience many short-term negative effects such as aggression, anxiety, shock, depression and incompatibility. They will also grow up to have less education, more anti-social behavior, higher rate of crimes and misdemeanor as well as higher rate of drug addiction (e.g., Akhondi 2007; Kameli 2007; Shahmiveh and Amiri 2013). Moreover, studies conducted in Iran have shown that divorced Iranian women have drastic reduction in their financial situation and experience several physical and mental illnesses (e.g., Aghajanian and Moghadas 1998; Zarei et al. 2013).

  5. See for example Deutsche Welle report entitled “Increases in divorce is not necessarily bad”. Available at: http://dw.de/p/15m0Q [accessed 28 January 2014] [In Persian].

  6. See Warnock and Warnock (2008). “Housing finance is what allows for the production and consumption of housing. It refers to the money we use to build and maintain the nation’s housing stock. But it also refers to the money we need to pay for it, in the form of rents, mortgage loans and repayments” (King 2009, pp. 3).

  7. Mehrieh is a dowry agreement where the wife receives some assets such as real estate or gold coins if the marriage ends in divorce.

  8. For more comparative figures within Islamic countries, see Hadjian (2013).

  9. In their analysis of Canada case study, Ariizumi et al. (2013) show that unlike the US studies, there is no significant relationship between unemployment rates and aggregate flows into divorce. They do, however, find evidence on negative and significant impact of unemployment rate on marriage rate, clarifying that such decline is mainly due to drop of re-marriage.

  10. It means that individuals will choose to consume more housing when they live together than when separated (Rainer and Smith 2010).

  11. For a survey of the Iranian family law see ZarRokh (2011).

  12. For more information regarding temporary marriage and its Islamic roots, especially in Shia see http://www.payvand.com/news/12/jun/1029.html.

  13. The BBC data is from the Iranian authorities which show the total number of 20,000 men went to jail in 2 years (2010 and 2011) due to their inability of paying Mehrieh (Farsi version of news: http://www.asriran.com/fa/print/202069). Another source of information in an Iranian news agency (Tabnak) in July 2014 shows that from total number of 210,672 prisoners in Iran, 8,000 prisoners are due to financial reasons. From this latter group, 2000 persons are in jail for Mehrieh related reasons (http://www.tabnak.ir/fa/print/413408).

  14. See BBC report at http://www.bbc.co.uk/news/world-middle-east-17147842.

  15. For data on the number of registered divorce in Iran see http://www.sabteahval.ir/en/default-789.aspx.

  16. This information is available at http://www.amar.org.ir/Default.aspx?tabid=96&agentType=ViewType&PropertyTypeID=46&currentpage=2.

  17. The misery index sums a country's unemployment and inflation rates to assess conditions on the ground (the higher the number, the worse off a country is).

  18. http://www.radiofarda.com/content/f9_iran_economy_minister_says_misery_index_50_percent/25195605.html [accessed 28 January 2014] [In Persian].

  19. Year fixed effects can control for policy reforms in specific year which affect all provinces in a country at the same time. Such policy shocks are like the example of Danish legal reform that changed how pension savings are shared upon divorce and thus affecting the divorce rates (see Amilon 2012).

  20. Results are robust in the case of using orthogonal deviation instead of first difference transformation of variables.

  21. Unfortunately, housing price index does not exist for long period therefore we only use HRI as a measure of housing costs.

  22. We thank referees for raising this point.

  23. This method has been used extensively in literature to measure, for example, the macroeconomic and political effects of oil price shocks. For more details on this methodology and its application in modeling shocks see Farzanegan and Markwardt (2009), Farzanegan (2011, 2014a) and Farzanegan and Raeisian Parvari (2014).

  24. We have also used the generalized impulse responses which is not sensitive to the ordering of variables (Pesaran and Shin, 1998). The response of divorce to housing costs shocks is similar to the Cholesky ordering. However, Doan (2010, p. 48) suggests against the Generalized impulse responses as “an attempt to avoid the difficulties of identifying orthogonal shocks in VAR models”.

  25. See also Iran Research Center of Information Technology’s report entitled “Speculation in housing market”. Available at: www.hamshahrionline.ir/news-52015.aspx [accessed 18 October 2013] [In Persian].

  26. http://www.mehrnews.com/detail/news/2122942 [accessed 20 October 2013] [In Persian].

  27. For a review of related literature on the curse of oil and its detailed transmission channels as well as its potential remedies see Farzanegan (2014b), Bjorvatn and Farzanegan (2013), Bjorvatn et al. (2012, 2013) and Farzanegan (2013b).

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Acknowledgments

We would like to thank the Co-Editor (Sonia Oreffice), two anonymous referees, Alireza Naghavi and participants at the DSE Seminar of University of Bologna (2014) and MACIE brown bag seminar (2014) at the School of Business and Economics of Philipps-University of Marburg for their useful comments.

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Authors and Affiliations

  1. Department of Middle East Economics, Center for Near and Middle Eastern Studies (CNMS), Philipps-University of Marburg, Deutschhausstraße 12, 35032, Marburg, Germany

    Mohammad Reza Farzanegan

  2. CESifo, Munich, Germany

    Mohammad Reza Farzanegan

  3. Marburg Centre for Institutional Economics (MACIE), Marburg, Germany

    Mohammad Reza Farzanegan

  4. ERF, Cairo, Egypt

    Mohammad Reza Farzanegan

  5. Department of Accounting, Economics and Finance, Swinburne Business School, Faculty of Business and Law, Swinburne University of Technology, Melbourne, VIC, 3122, Australia

    Hassan Fereidouni Gholipour

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Correspondence to Mohammad Reza Farzanegan.

Appendix

Appendix

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Table 8 Average divorce rates, house prices and rents per square meter by province (2000–2010)
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Farzanegan, M.R., Gholipour, H.F. Divorce and the cost of housing: evidence from Iran. Rev Econ Household 14, 1029–1054 (2016). https://doi.org/10.1007/s11150-014-9279-0

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