DIVORCE LAW REFORMS AND DIVORCE RATES IN THE USA: AN INTERACTIVE FIXED‐EFFECTS APPROACH

Dukpa Kim · Tatsushi Oka

73 citations0/0 files storedJournal of Applied Econometrics

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Family Dynamics and Relationships Family and Matrimonial Law Gender, Labor, and Family Dynamics

Abstract

SUMMARY This paper estimates the effects of unilateral divorce laws on divorce rates in the USA from a panel of state‐level divorce rates. We use the interactive fixed‐effects model to address the issue of endogeneity due to the association between cross‐state unobserved heterogeneity and divorce law reforms. We document that earlier studies in the literature do not fully control for unobserved heterogeneity and result in mixed empirical evidence on the effects of divorce law reforms. While reconciling these conflicting results, our results suggest that divorce law reforms have temporal positive effects on divorce rates, thus confirming the 2006 findings of Wolfers. Via simulation experiments, we assess the degree to which faulty inclusion or faulty exclusion of interactive fixed effects affects the policy effect estimators. Our results suggest that faulty inclusion only results in efficiency loss whereas faulty exclusion causes bias. Copyright © 2013 John Wiley & Sons, Ltd.

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References

1991A Treatise on the Family 2006Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure 1988Estimating Vector Autoregressions with Panel Data 2002Determining the Number of Factors in Approximate Factor Models 2011Robust Inference With Multiway Clustering 2009Panel Data Models With Interactive Fixed Effects 1975Estimation of a Model with Multiple Indicators and Multiple Causes of a Single Latent Variable 2006Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results

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