| Summary: | Research in the economics of the family has established that economic incentives play a significant role in the process of marriage formation and dissolution. This paper distinguishes between two aspects of husbands’ earnings in the process of divorce. On one hand, measured earnings might exert a direct effect on the stability of marriage. On the other hand, some husbands possess unobserved traits that might simultaneously affect their earnings growth and their propensities to terminate their marriages. This research utilizes data from the United States Current Population Survey for years 2003 through 2010, and is based on samples of initially married men at two points in time. We seek first to examine whether marriage dissolution occurs in the presence of correlation between unobserved factors present in both earnings during the first period and the subsequent decision to divorce. Second, we look for an explicit role of earnings per se in the divorce decision. Results of the study provide support for significant effects in both dimensions. Increases in observed earnings result a tendency to stabilize marriages. Controlling for observed earnings, however, there is evidence that men with strong unmeasured earnings attributes possess latent propensities to dissolve their marriages.
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