The effect of a change in household income on the probability of divorce

This research tries to measure the effect of a household income shock on the probability of divorce, using data from the annual LISS panel. A linear probability model and a cox proportional hazard model are used to measure this effect. The results of the linear probability model suggest that having experienced a household income shock of at least 10 percent increases the likelihood of being divorced. A negative household income shock has the strongest positive effect on the probability of being divorced. This relationship becomes stronger as the threshold increases. The results of the cox proportional hazard analyses showed that there are 2.5 times more divorced individuals that have experienced a household income shock of at least 10 percent relative to not divorced individuals. There are 9.6 times more divorced individuals that experienced a negative household income shock of at least 50 percent relative to not divorced individuals. Implying that the probability of divorce, when experiencing such a household income shock, increases with 4.24%. The results also showed that a longer duration of marriage increases the probability of divorce if someone experienced a household income shock.