Published: November 18, 2019


Download: Life Course Centre Working Paper: 2019-22

Authors:

Nicole Kapelle and Janeen Baxter.


Non-Technical Summary:

Ample research has linked marital dissolution to a substantial decline in income for women. Effects for men’s income are less substantial with some studies even finding income increases depending on the social context and income measure. Wealth as an additional aspect of economic wellbeing has received less attention in studies on the economic consequences of divorce. An incipient literature however indicates that wealth levels may decline through marital dissolution for both men and women. The division of property at divorce, costs for moving out of the marital home and into a new home, or legal expenses such as court fees and solicitor fees can be expected to drain resources. Costs thereby vary depending on the stage of the marital dissolution process, which sometimes takes several years. Previous research however neglects this idea and focuses on either separation (the split of the marital household into two single households) or divorce (the legal termination of the marriage). It is therefore unclear at what point of the marital dissolution process, men and women lose wealth.

The present study therefore examines personal wealth changes over the dissolution process starting up to three years prior to separation and until 15 years after legal divorce. Using German panel data, we use fixed effects regression to examine personal wealth of men and women that experienced a marital dissolution between 2002 and 2017. We additionally split overall personal wealth into the housing wealth component and more liquid financial wealth.

Our results show that both men and women lose most of their wealth during separation, whereas the legal divorce did not lead to any additional wealth penalties. This separation penalty was mainly driven by declines in housing wealth. Financial wealth – as a smaller, but more liquid aspect of overall wealth – already declined prior to separation. Wealth levels did not improve in the short-term after divorce for either men or women. Overall, we show that both men and women experience critical wealth declines, although men still hold more wealth than women at any time emphasizing the stronger vulnerability of women’s economic wellbeing.

Published

November 18, 2019