Female labor supply and divorce : new evidence from Ireland

If participation in the labor market helps to secure women's outside options in
the case of divorce/separation, an increase in the perceived risk of marital dissolution
may accelerate the increase in female labor supply. This simple prediction has been
tested in the literature using time and/or spatial variation in divorce legislation
(e.g., across US states), leading to mixed results. In this paper, we suggest testing
this hypothesis by exploiting a more radical policy change, i.e., the legalization of
divorce. In Ireland, the right to divorce was introduced in 1996, followed by an
acceleration of marriage breakdown rates. We use this fundamental change in the
Irish society as a natural experiment. We follow a difference-in-difference approach,
using families for whom the dissolution risk is small as a control group. Our results
suggest that the legalization of divorce contributed to a significant increase in female labor supply, mostly at the extensive margin. Results are not driven by selection and
are robust to several specification checks, including the introduction of household fixed effects and an improved match between control and treatment groups using
propensity score reweighting.