Female earnings and the divorce rate: a simultaneous equations model

Economists have contributed a great deal of research, both theoretical and empirical, to the study of marital formation and dissolution. Many empirica l examinations of marriage and divorce rates exist based on Becker's semina l contributions to the literature. All of these divorce studies are single equation models, with female earnings assumed exogenous. As discussed by Be cker (1981), however, causality may run in the opposite direction as well: the divorce rate may influence female earnings. This paper estimates a simu ltaneous equations model in which divorce rates and female earnings are the jointly endogenous variables. Data are by state, for 1960, 1970, 1980 and 1990. The state-wide divorce rate equation is an extension of Waters and Re ssler (1999), and the specification of a state-wide earnings equation follo ws standard human capital theory. The specification of joint endogeneity be tween female earnings and the divorce rate allows valid inferences to be ma de regarding the effect of female earnings on divorce for the first time. M ost previous single equation studies of divorce have found that increases i n female earnings significantly increase divorce rates. A simultaneous equa tions model will allow inferences to be made regarding the possibility of j oint determination, which may cause a reevaluation of previous results.