DP6228 | The Effect of Marital Breakup on the Income Distribution of Women with Children

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Having a female firstborn child significantly increases the probability that a woman?s first marriage breaks up. Recent work has exploited this exogenous variation to measure the effect of marital break-up on economic outcomes, and has concluded that divorce has little effect on women?s average household income. Employing an Abadie (2003) technique that allows us to look at the impact of marital break-up throughout the income distribution, however, we find that divorce greatly increases the probability that a woman lives in a household with income in the bottom quartile. While women partially offset the loss of spousal earnings with child support, welfare, combining households, and substantially increasing their labour supply, divorce significantly increases the odds that a woman with children is poor.