Divorce risk, wages and working wives: A quantitative life-cycle analysis of female labour force participation

This article develops a quantitative life-cycle model to study the increase in married women's labour force participation (LFP). We calibrate the model to match key life-cycle statistics for the 1935 cohort and use it to assess the changed environment faced by the 1955 cohort. We find that a higher divorce probability and changes in wage structure are each able to explain a large proportion of the LFP increase. Higher divorce risk increases LFP not because the latter contributes to higher marital assets or greater labour market experience, however. Instead, it is the result of conflicting spousal preferences towards the adjustment of marital consumption in the face of increased divorce risk.