Investment in Household Public Goods and Divorce

Mariña Fernandez Salgado, University of Essex

This article studies the interaction between divorce and spouses' investments in household public goods. I develop a two period model with imperfect information where the decision of divorce is endogenously determined by intra-household investments. The model predicts that insufficient contributions to the production of household public goods lead to marital dissolution. A further implication of the model is that quality of investments is essential for the divorce decision. The predictions of the model are supported by the empirical analysis conducted using the Children Development Supplement (CDS) of the Panel Study of Income Dynamics (PSID). Children represent the household public good while time that parents spend with their children, the investments. I find that the hazard of separation decreases with paternal time and in particular with high quality time. Finally, a closer look at the nature of parental time highlights lower hazard of divorce in families with weaker gender roles.