Accounting for Changes in the Labor Supply of Recently Divorced Women

Abstract

How much of the rise in women's labor supply associated with divorce can be attributed to observable changes in the wife's environment? Such changes include a reduction in nonwage family income, a rise in her after-tax wage rate, changes in the number of children present, and a reduction in husband's hours at home. We use panel data to address this question. When we do not account for individual effects, we find that changes in observables are important, but a residual effect dependent solely on marital status remains. In estimates that do control for individual heterogeneity, observable changes in the wife's environment account for even less of the total shift in labor supply.

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