@techreport{c4c29055e0cd49cea4b3416e5b9f6923,
title = "Housing Decision with Divorce Risk",
abstract = "We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners{\textquoteright} higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.",
keywords = "Household finance, Real estate, Life cycle, Divorce risk, Family economics, Household finance, Real estate, Life cycle, Divorce risk, Family economics",
author = "Marcel Fischer and Natalia Khorunzhina",
year = "2018",
month = nov,
day = "14",
language = "English",
series = "MPRA Paper",
publisher = "Munich Personal RePEc Archive",
number = "90090",
address = "Germany",
type = "WorkingPaper",
institution = "Munich Personal RePEc Archive",
}