The Economic Impact of Divorce

Russ Roberts:

Scott Sumner makes some interesting observations on how far we’ve come and the proposals  on the table today compared to 40 years ago. Along the way he talks about the economic problems of the 1970s and how growth rates dropped around the world. He then points out that it’s really hard to make thoughtful generalizations and how easy it is to leap to false conclusions, particularly about which policies worked and which didn’t. Of course, he is right.

But there is one change that took place in the 1970s that I think is under-appreciated by economists.

Divorce rates went up virtually everywhere in the 1970s. People also delayed getting married. Here is one source on the US data. Here is one on Europe. These are big changes, typically a doubling or more in divorce rates between 1960 and 1980.

These changes are typically ignored by economists. But I would expect such large changes to affect productivity and measured inequality. The latter point is that the explosion in divorce rates changed the number of households relative to population, so that looking at various quintiles or deciles over time became very misleading.