Lucky in Life, Unlucky in Love? The Effect of Random Income Shocks on Marriage and Divorce

Abstract

Economists have long been interested in the extent to which economic resources affect decisions to marry and divorce. For married couples, an increase in resources can either provide a stabilization effect or, alternatively, can enable divorce by allowing the couple to overcome costs associated with divorce. Similarly, while economic theory predicts that an increase in income makes an unmarried person more attractive to potential marriage partners, it may also make single life more attractive. However, answering these questions empirically has been difficult due to a lack of exogenous income shocks. We overcome this problem by exploiting the randomness of the Florida Lottery and comparing recipients of large prizes to those of small prizes. Results indicate that while positive income shocks of $25,000 to $50,000 do not cause statistically significant or economically meaningful changes in divorce rates, single women are less likely to marry as a result of the additional income.

Keywords: Marriage, Divorce

JEL Classification: J12