Employment, Income and Divorce – What Can We Learn from Causal Analysis?

Daniel Brüggmann, Hertie School of Governance

In 2002 the male breadwinner model is still the predominant model in West Germany. A large share of married women is either non-employed or at most marginal or part-time employed and therefore dependent on the household income. Consequently, these women experience a dramatic short-term drop in household income when their marriage ends. This paper analyses the consequences of divorce by modeling a quasi-experimental design and estimates [1] the extend to what women adjust their labor market participation and [2] to what extend this monetarizes in earned income. We analyze the effect for the first divorce of all West German women with at least five years of marriage and who are aged between 25 to 55.

Results, for all West German women in the sample, show that a divorce significantly encourages women to participate in the labor market. The preferred type of employment is thereby regular employment (employment with social security contribution) as opposed to marginal employment. The increase in employment rates leads to an increase in the average income following divorce. Nevertheless, once we control for labor market participation, as is necessary since income is only observed for those in the labor market, we do not find evidence that divorced women work or earn more than employed married women.

We are also able to identify strong heterogeneous effects among divorced women. West German women with no labor market participation in the five years prior union dissolution respond stronger to divorce than women with labor market participation prior dissolution.

Our results are derived from weighted Difference-in-Difference estimations and were scrutinized by robustness checks for variations in covariates and sensitivity analyses for deviations from underlying model assumptions.

Presented in Poster Session 2