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Journal Issue: Children and Divorce Volume 4 Number 1 Spring/Summer 1994

Financial Impact of Divorce on Children and Their Families
Jay D. Teachman Kathleen M. Paasch

Introduction

The preponderance of evidence suggests that, following divorce, custodial parents—almost always mothers—suffer considerable decline in economic well-being. Why is this so? To some degree, the economic distress suffered by mothers and children is structural. That is, given the nature of fixed costs (for example, housing and transportation), it is cheaper to live in one household than in two. Because two households are formed when a couple divorces, the same resources must now cover greater fixed costs. Moreover, costs attendant to marital disruption, such as legal fees and relocation costs, can drain either partner's financial reserves.1

The situation for mothers and children is made more precarious by pre-existing differences in earning power. In general, fathers earn more than mothers partly because of greater human capital development and greater returns to this capital. When a man and woman live together, his earnings are shared more or less equally. After divorce, however, fathers are much less likely to share their earnings as equally, dramatically reducing the resources available to mothers and children, even if the mother works.

In this article, we review evidence pertaining to the financial impact of divorce on children and their families. We find that mothers and children often experience a substantial decline in income following a divorce. Fathers are much less likely to experience such a decline and often experience an increase in income, especially if one considers income relative to basic needs based on family size. Indeed, the fact that fathers are substantially less likely to experience a drop in economic well-being following divorce leads us to focus our attention almost exclusively on mothers. First, we consider evidence on the economic circumstances of families both before and after divorce. Next, we turn our attention to the relationship between divorce and use of public assistance programs, followed by a discussion of child support and property settlements. Finally, we conclude with a discussion of the mechanisms generating differences in outcomes associated with divorce and the roadblocks to economic recovery within a policy framework.