What are the Economic Consequences of Divorce? An income study focusing on divorced men and women in the UK 1992-2008

Abstract: Research has consistently show divergent economic outcomes between men and women following divorce. Typically men fare better with either small declines in income or even small gains, whereas women and children face tougher financial penalties. These findings however have not been consistent both in their amount and also their explanations and so valid questions remain. Through multivariate regression using the British household panel survey (BHPS) between 1992-2008, this paper seeks to examine key theories which attempt to explain the greater female income divorce penalty; including the unequal distribution of costs associated with children, propensity and association of working part-time and the implication of work place absences due to family care during marriage on human capital and lower incomes following divorce. This paper finds a consistent financial penalty of around 20% for divorced women and a small premium for divorced men which is sensitive to the inclusion of child custody within econometric models. In addition the penalty associated with divorced women appears sensitive to variables which seek to model lower human capital arising from reduced labour supply during marriage, though much more analysis and caution with regards to this finding and it’s generalizability is advised.