Bastian Schulz (Aarhus University) will present "Marriage and Divorce under Labor Market Uncertainty"

Abstract :
We extend transferable-utility search-matching model of the marriage market by allowing men and women to make labor search intensity decisions both on and off the job based on their current and future marriage market status. For singles, reservation wages depend on current wages/transfers, home production, and the marriage market option value. For couples, reservation wages additionally depend on the type and labor market status of both spouses, a match-specific shock, and the propensity to divorce upon transitioning in the labor market. Thus, divorces are triggered by either match-specific shocks or labor market transitions, but not all shocks/transitions lead to divorce. We structurally estimate the model using German micro data. The estimated model allows us to decompose the observed divorce flow into divorces due to match-specific shocks and “labor market divorces”. Preliminary findings suggest that the share of labor market divorces rose to more than 20% during the 2000s in Germany. Much of this increase is driven by previously unemployed married women who start working, a trend that can be linked to the labor market reforms of the mid 2000s.