The Economics Of Divorce

These Pew stats on divorce that Kevin Drum highlights today (see fact sheet for more) are a good pretext for something I’ve been meaning to get off my chest for a while. When people look at income statistics, they often fail to explicitly account for the fact that there are tradeoffs between economic and non-economic aspects of life. From an income perspective, it’s clear that most women who get divorced pay a meaningful financial penalty for it even before you consider the fact that there are a lot of economies of scale to cohabitation. But there’s more to life than money, and people can be rationally willing to pay a hefty financial price to get out of a marriage that’s making them unhappy.

At the same time, there are limits to the price people are willing to pay. So as you shift out of the Mad Men universe and into a realm of greater economic opportunities for women, one thing you’ll see is more women voluntarily taking the plunge into income-reducing divorces. Only a very naive reading of the data would construe this as an actual decline in women’s well-being. Rather, it’s a manifestation of shifting from an unfair social paradigm to a less-unfair one. Now as the earnings gap between men and women has narrowed, we see that the highly gendered nature of the divorce penalty is going away, but the penalty is still out there. Taking the option of divorce away would make many economic statistics look superficially rosier, but would people actually be better off returning to 1950s social norms? I’m skeptical.