Effects of different divorce probabilities on female labor force participation and fertility

Abstract

'During the last decades, increases in divorce rates and female labor force participation have taken place all across Europe. At the same time, fertility rates have markedly sunk. While the causal relation between fertility and female labor force participation has been discussed extensively, we address the possibility of the rise in divorce risk and the change in divorce regimes as antecedents of both, risen female labor force participation and low fertility rates. We argue that unilateral divorce regimes increase married women's investments in market related human capital as opposed to investments in household productivity skills. The reason is that this should lower their threat points and thus their marital bargaining power as well as their outside options. Furthermore, also higher probabilities of getting divorced should reduce the propensity of rationally acting wives to accumulate marital specific capital if husbands can unilaterally leave the marriage. We use longitudinal data on 18 European countries covering 45 years and present fixed-effects regression models to identify the causal effects of divorce regime and divorce rates on fertility and female labor force participation rates. In a second step, we analyze event history data on German married and divorced couples using predicted divorce risks as the main explanatory variable. Our findings confirm the hypothesized effects of divorce regime and divorce probability on female labor force participation and fertility, if divorce probabilities are measured as predicted divorce risks. However, divorce rates are inappropriate proxy measures for divorce probabilities.' [author's abstract]