Thursday, May 23, 2013

Women's emancipation: more education and more divorces

Divorce rates are at an all-time high, and many blame a lack of morals. That is not a good explanation. There is always an economic argument in the background of societal change, and it is no different here. There is more divorce because the incentives are right for that. And if the incidence of divorce has changed, it must be because it now makes more sense for people to divorce, not because sentiments have changed.

Fatih Guvenen and Michelle Rendall argue that the cost of divorce used to be very high for the women. They have a natural bond to their children and want the best for them. But the lack of education and thus earning potential made it difficult for women to raise them on their own. With the increase of education among women, who have now overtaken men in this regard, plus the narrowing of the gender wage gap, the outlook is now much better for a single woman, mother or not. Thus she is more likely to seek divorce under the same circumstances as before. It also implies that women are less likely to seek marriage as they can better fend for themselves. Recall that the female labor supply has dramatically increased over the last half-century. The institution of unilateral divorce laws in the 1970s in the US also contributed to this evolution. Using a carefully calibrated model, the authors can actually quantify this with counterfactual experiments. 25% of the increase in education and half the increase of the female labor supply can be traced back to this divorce law reform. And this increase in education has a very substantial impact on well-being, corresponding to $11,000 a year. The model is rich enough to also quantify how good this education improvement is for attracting a better spouse, which is worth about $4,000 a year.

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