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Discipline of Marketing

The economic consequences of relationship breakdown: income shocks and the extended family

Dr. Hayley Fisher, University of Sydney

18th Oct 2013  11:00 am - Darlington Centre School Building Room 7

When a marriage breaks down, there are unavoidable financial consequences:losing the economies of scale of cohabitation means it is not possible to maintain living standards for all household members. A substantial body of work has shown that in developed economies, the financial burden falls most heavily on women, who experience large falls in equivalised household income. In contrast, household income often increases for men. In this paper, we use data from the British Household Panel Survey to examine what explains this phenomenon. We show that women do experience a greater fall in household income on divorce, and that this fall is most pronounced amongst higher income households. Men do not experience a fall in equivalised household income, and those separating from lower income households experience increasing household resources. However, this superior outcome for men is not all it seems: one important means by which men's household income remains high is their living arrangements. Men are far more likely than women to live with their extended family or other adults, and the additional income of other adults explains a large portion of the difference between men's and women's experiences. Once this additional income has been discounted, men also experience a substantial decrease in resources.