Abstract
Given that divorce often represents a high-stakes income gamble, we ask how individual levels of risk tolerance affect the decision to divorce. We extend the orthodox divorce model by assuming that individuals are risk averse, that marriage is risky, and that divorce is even riskier. The model predicts that conditional on the expected gains to marriage and divorce, the probability of divorce increases with relative risk tolerance because risk averse individuals require compensation for the additional risk that is inherent in divorce. To implement the model empirically, we use data for first-married women and men from the 1979 National Longitudinal Survey of Youth to estimate a probit model of divorce in which a measure of risk tolerance is among the covariates. The estimates reveal that a 1-point increase in risk tolerance raises the predicted probability of divorce by 4.3% for a representative man and by 11.4% for a representative woman. These findings are consistent with the notion that divorce entails a greater income gamble for women than for men.
Similar content being viewed by others
References
Ahn, T. 2010. “Attitudes Toward Risk and Self-employment of Young Workers.”Labour Economics 17: 434–42.
Axinn, W.G. and A. Thornton. 1992. “The Relationship Between Cohabitation and Divorce: Selectivity or Causal Inference?”Demography 29: 357–74.
Barsky, R.B., M.S. Kimball, F.T. Juster, and M.D. Shapiro. 1997. “Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study.”Quarterly Journal of Economics 112: 537–79.
Becker, G.S. 1974. “A Theory of Marriage.” Pp. 299–344 inThe Economics of the Family: Marriage, Children, and Human Capital, edited by T.W. Schultz. Chicago: University of Chicago Press.
Becker, G.S., E.M. Landes, and R.T. Michael. 1977. “An Economic Analysis of Marital Instability.”Journal of Political Economy 85: 1141–88.
Bianchi, S.M., L. Subaiya, and J.R. Kahn. 1999. “The Gender Gap in the Economic Well-being of Nonresident Fathers and Custodial Mothers.”Demography 36: 195–203.
Bickel, P.J. and E.L. Lehmann. 1979. “Descriptive Statistics for Nonparametric Models IV. Spread.” Pp. 33–40 inContributions to Statistics, edited by J. Jurečková. Dordrecht: Reidel Publishing.
Brien, M.J., L.A. Lillard, and S. Stern. 2006. “Cohabitation, Marriage, and Divorce in a Model of Match Quality.”International Economic Review 47: 451–94.
Bumpass, L.L., T.C. Martin, and J.A. Sweet. 1991. “The Impact of Family Background and Early Marital Factors on Marital Disruption.”Journal of Family Issues 12: 22–42.
Burdett, K. and M.G. Coles. 1999. “Long-Term Partnership Formation: Marriage and Employment.”The Economic Journal 109: 307–34.
Cancian, M., S. Danziger, and P. Gottschalk. 1993. “Working Wives and Family Income Inequality Among Married Couples.” Pp. 195–223 inUneven Tides: Rising Inequality in America, edited by S. Danziger and P. Gottschalk. New York: Russell Sage Foundation.
Charles, K.K. and M. Stephens, Jr. 2004. “Job Displacement, Disability, and Divorce.”Journal of Labor Economics 22: 489–522.
Chateauneuf, A., M. Cohen, and I. Meilijson. 2004. “Four Notions of Mean-Preserving Increase in Risk, Risk Attitudes and Applications to the Rand-Dependent Expected Utility Model.”Journal of Mathematical Economics 40: 547–71.
Chiappori, P.-A. and P.J. Reny. 2006. “Matching to Share Risk.” Discussion paper. Department of Economics, University of Chicago.
Chiappori, P.-A. and Y. Weiss. 2007. “Divorce, Remarriage and Child Support.”Journal of Labor Economics 25: 37–74.
Ellman, I.M. and S.L. Lohr. 1998. “Dissolving the Relationship Between Divorce Laws and Divorce Rates.”International Review of Law and Economics 18: 341–59.
Friedberg, L. 1998. “Did Unilateral Divorce Raise Divorce Rates? Evidence From Panel Data.”American Economic Review 88: 608–27.
Greene, W.H. and A.O. Quester. 1982. “Divorce Risk and Wives’ Labor Supply Behavior.”Social Science Quarterly 63: 16–27.
Hess, G.D. 2004. “Marriage and Consumption Insurance: What’s Love Got to Do With It?”Journal of Political Economy 112: 290–318.
Hoffman, S.D. and G.J. Duncan. 1995. “The Effect of Incomes, Wages, and AFDC Benefits on Marital Disruption.”Journal of Human Resources 30: 19–41.
Jewitt, I. 1989. “Choosing Between Risky Prospects: The Characterization of Comparative Statics Results, and Location Independent Risk.”Management Science 35: 60–70.
Johnson, W. and J. Skinner. 1986. “Labor Supply and Marital Separation.”American Economic Review 76: 455–69.
Kimball, M.S., C.R. Sahm, and M.D. Shapiro. 2008. “Imputing Risk Tolerance From Survey Responses.”Journal of the American Statistical Association 103: 1028–38.
Kotlikoff, L.J. and A. Spivak. 1981. “The Family as an Incomplete Annuities Market.”Journal of Political Economy 89: 372–91.
Landsberger, M. and I. Meilijson. 1994. “The Generation Process and an Extension of Jewitt’s Location Independent Risk Concept.”Management Science 40: 662–69.
Lehrer, E.L. and C. Chiswick. 1993. “Religion as a Determinant of Marital Stability.”Demography 30: 385–404.
Lichter, D.T., D.K. McLaughlin, and D.C. Ribar. 2002. “Economic Restructuring and the Retreat From Marriage.”Social Science Research 31: 230–56.
Light, A. 2004. “Gender Differences in the Marriage and Cohabitation Income Premium.”Demography 41: 263–84.
Lillard, L.A., M.J. Brien, and L.J. Waite. 1995. “Premarital Cohabitation and Subsequent Marital Dissolution: A Matter of Self-selection?”Demography 32: 437–57.
Lundberg, S. and E. Rose. 2003. “Child Gender and the Transition to Marriage.”Demography 40: 333–50.
Lundberg, S. and R.A. Pollak. 1994. “Separate Spheres Bargaining and the Marriage Market.”Journal of Political Economy 101: 9.
—. 1996. “Bargaining and Distribution in Marriage.”Journal of Economic Perspectives 10(4): 139–58.
Manser, M. and M. Brown. 1980. “Marriage and Household Decision-Making: A Bargaining Analysis.”International Economic Review 21: 31–44.
McElroy, M.B. and M.J. Horney. 1981. “Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand.”International Economic Review 22: 333–49.
Mechoulan, S. 2006. “Divorce Laws and the Structure of the American Family.”Journal of Legal Studies 35: 143–74.
Moffitt, R.A. 2000. “Female Wages, Male Wages, and the Economic Gains to Marriage: The Basic Evidence.” Pp. 302–19 inThe Ties That Bind: Perspectives on Marriage and Cohabitation, edited by L.J. Waite. New York: Aldine de Gruyter.
Mortensen, D.T. 1988. “Matching: Finding a Partner for Life or Otherwise.”American Journal of Sociology 94: S215-S240.
Murphy, K.M. and R.H. Topel. 1985. “Estimation and Inference in Two-Step Econometric Models.”Journal of Business and Economic Statistics 3: 88–97.
Oppenheimer, V.K. 1997. “Women’s Employment and the Gain to Marriage: The Specialization and Trading Model.”Annual Review of Sociology 23: 431–53.
Peters, H.E. 1986. “Marriage and Divorce: Informational Constraints and Private Contracting.”American Economic Review 76: 437–54.
Pissarides, C.A. 1974. “Risk, Job Search, and Income Distribution.”Journal of Political Economy 82: 1255–67.
Pollak, R.A. 2005. “Bargaining Power in Marriage: Earnings, Wage Rates and Household Production.” NBER Working Paper No. 11239. National Bureau of Economic Research, Cambridge, MA.
Pratt, J.R. 1964. “Risk Aversion in the Small and in the Large.”Econometrica 32: 122–36.
Rosenzweig, M.R. and O. Stark. 1989. “Consumption Smoothing, Migration, and Marriage: Evidence From Rural India.”Journal of Political Economy 97: 905–26.
Ross, S.A. 1981. “Some Stronger Measures of Risk Aversion in the Small and the Large With Applications.”Econometrica 49: 621–38.
Sahib, P.R. and X. Gu. 2002. “To Tie the Knot or Not: Cohabitation, Marriage and Individuals’ Attitudes to Risk.”Demographic Research 6: 355–82.
Sahm, C.R. 2007. “Stability of Risk Preference.” Finance and Economics Discussion Series Paper 2007-66. Division of Research and Statistics and Monetary Affairs, Federal Reserve Board, Washington, DC.
Schmidt, L.E. 2008. “Risk Preferences and the Timing of Marriage and Childbearing.”Demography 45: 439–60.
Spivey, C. 2010. “Desperation or Desire? The Role of Risk Aversion in Marriage.”Economic Inquiry 48: 499–516.
Stevenson, B. 2007. “The Impact of Divorce Laws on Marriage-Specific Capital.”Journal of Labor Economics 25: 75–94.
Weiss, Y. 1997. “The Formation and Dissolution of Families: Why Marry? Who Marries Whom? And What Happens Upon Divorce?” Pp. 81–123 inHandbook of Population and Family Economics, Vol. 1 A, edited by M.R. Rosenzweig and O. Stark. Amsterdam: Elsevier Science.
Weiss, Y. and R.J. Willis. 1997. “Match Quality, New Information, and Marital Dissolution.”Journal of Labor Economics 15: S293-S329.
Wolfers, J. 2006. “Did Unilateral Divorce Raise Divorce Rates? A Reconciliation and New Results.”American Economic Review 96: 1805–20.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Light, A., Ahn, T. Divorce as risky behavior. Demography 47, 895–921 (2010). https://doi.org/10.1007/BF03213732
Issue Date:
DOI: https://doi.org/10.1007/BF03213732