Till Debt do us Part: A Model of Divorce and Personal Bankruptcy |
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| Authors: | Jonathan D. Fisher Angela C. Lyons |
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| Affiliation: | (1) Division of Price and Index Number Research, U.S. Bureau of Labor Statistics, Washington, DC 20212, USA;(2) Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, 326 Mumford Hall, 1301 W. Gregory Drive, Urbana, IL 61801, USA |
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| Abstract: | The number of personal bankruptcies has increased dramatically since 1990, and a growing number of filers are divorced. While previous research shows that divorce significantly increases the probability of bankruptcy, these studies assume divorce is exogenous. This study uses the Panel Study of Income Dynamics to investigate the relationship between divorce and bankruptcy. Single-equation probit results show that divorce significantly increases the probability of bankruptcy and bankruptcy significantly increases the probability of divorce. However, after controlling for endogeneity, the effect of divorce on bankruptcy and the effect of bankruptcy on divorce both fall by a significant amount and are statistically insignificant. The findings suggest that future research needs to more carefully model the role that financial distress plays within a marriage. |
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| Keywords: | Personal bankruptcy Divorce Simultaneous equations |
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