Preparing for the worst: post-divorce instability risk and economic behaviour of households

Usman, Sehrish (2024): Preparing for the worst: post-divorce instability risk and economic behaviour of households.

Abstract

Who thrives when alimony payments change? Restrictions on spousal alimony influence intra-family economic decisions by altering bargaining positions and raising concerns about post-divorce financial instability. Existing findings on restricted regimes are contradictory and need more clarity on the differential impact across heterogeneous households. This paper explores behavioural adaptations in labour supply and saving decisions of intact married partners in response to amendments in alimony reform in Germany. Using a difference-in-difference framework and longitudinal and retrospective datasets, I show that policy led to increased labour market participation of married women. However, behavioural responses vary significantly depending on the age cohort, family composition, duration of relationship, and income levels.

• Item Type: MPRA Paper
• Language: English
• Keywords: Household Economics, Spousal bargaining, Intra-family Decisions, Saving, Labor Supply, Policy Reform
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D13 - Household Production and Intrahousehold Allocation; D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; J - Labor and Demographic Economics > J1 - Demographic Economics > J12 - Marriage ; Marital Dissolution ; Family Structure ; Domestic Abuse; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply

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