Housing Decision with Divorce Risk

Research output: Contribution to journalJournal articleResearchpeer-review

172 Downloads (Pure)


We build a life‐cycle model of housing decisions under divorce risk that predicts that the recent increase in divorce rates leads to reduced homeownership rates. 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' 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.
Original languageEnglish
JournalInternational Economic Review
Issue number3
Pages (from-to)1263-1290
Number of pages28
Publication statusPublished - Aug 2019

Cite this