Female Labor Supply Response to Alimony: Evidence from Massachusetts

Abstract

This paper studies the labor supply response of women to changes in expected alimony. Using an alimony law change in the US that significantly reduced the post-divorce alimony support among women, I first show that this led to an increase in divorce probability. Second, consistent with the theoretical prediction from a simple model of labor supply, the reform led to an increase in the female labor force participation, with a larger increase among ever-married and more educated samples of women. As a result, the average female wage income increased after the reform. However, while labor supply increased, I show that most of this increase was concentrated in part-time employment, which may not be sufficient to compensate for the expected loss in alimony income. I estimate a net loss of $40,621 in PDV of lifetime income due to the reform. In light of the recent movement in the US to reform alimony laws, these findings are pertinent to understand its implications on women's labor supply and economic well-being.