May your wealth be easily divisible by two: marital dissolution and personal wealth of German men and women over the life course

Abstract

Wealth provides advantages above those provided by earnings including the access to an objective and subjective economic buffer during financial hardship (Spilerman, 2000). However, individuals differ greatly in their ability to generate and maintain wealth (Killewald, Pfeffer, & Schachner, 2017). The lack of sufficient private wealth is becoming progressively problematic, as even countries with generous welfare systems, such as Germany, have increasingly emphasised personal economic responsibility throughout the life course (Seeleib-Kaiser, 2016). It is thus urgent to understand the factors that disrupt individuals’ wealth accumulation given their implications for the economic wellbeing of the population in forthcoming years.While family dynamics have been recognised as a source of stratification (McLanahan & Percheski, 2008), marital dissolution has received little attention within wealth stratification research despite this event being linked to a range of financial – and potentially wealth-relevant – burdens (e.g. relocation costs, administrative divorce costs). This thesis investigates the association between marital dissolution and wealth of men and women in Germany. I thereby expand on an incipient body of US research that found that marital dissolution is associated with substantially lower household or per-capita wealth (e.g. Zagorsky, 2005; Zissimopoulos, Karney, & Rauer, 2015). These studies, however, almost exclusively used cross-sectional data and static theories, although the processes linking marital dissolution and wealth are likely dynamic, with important wealth-related processes taking place before and after marital separation and divorce. Furthermore, due to data restrictions, previous studies insufficiently considered gender differences although the economic outcomes of marital dissolution, at least for income, have been shown to differ between men and women. To address these shortcomings in previous research, I aim to (a) explain how marital dissolution affects individuals’ wealth levels and wealth accumulation, including immediate and long-term outcomes, and (b) explore how, and to what degree, the association between marital dissolution and wealth is gendered.I rely on three methodological and theoretical developments to address these aims. First, I draw on the life course framework, which provides a set of heuristics that acknowledge patterns of stability and change. Second, addressing limitations of static methods applied in previous research, I build on statistical methods that provide more appropriate tools to analyse patterns of progression, individual change, and dynamic processes. My quantitative approach includes panel regressions and sequence analysis. Third, I rely on novel longitudinal wealth data from the German Socio-Economic Panel (SOEP). These data are unique in that they were collected separately for each household member (i.e. at the personal level), which enable a gender-sensitive approach.My thesis highlights a range of key findings: First, marital dissolution is associated with a substantial immediate wealth penalty for both men and women. Examining changes in wealth along the multi-stage process of marital dissolution (i.e. anticipation of the dissolution of the marriage, separation of the marital household, legal divorce, post-divorce adjustment), it becomes evident that the majority of wealth, and particularly housing wealth, is lost during marital separation. Administrative divorce costs add no additional wealth penalty. Second, although both men and women experience substantial personal wealth penalties and end up with similar housing wealth levels, divorced women hold lower financial wealth. Despite common public perceptions that all available resources are divided equally at divorce, some within-couple wealth inequalities – particularly in financial wealth – are maintained in line with legal regulations. Thus, women endure a financially more precarious position after divorce. Third, previous experiences of marital dissolution are commonly associated with substantially lower wealth in late working age for both men and women, although women are more disadvantaged. Finally, lower wealth of ever-divorced men and women in late working age compared to continuously married men and women is a direct result of the immediate wealth shocks experienced around marital dissolution rather than divorcees’ differences in wealth accumulation rates after divorce. Thus, results also highlight that divorcees cannot compensate initial shocks over time. Furthermore, selection effects by which those with less wealth are disproportionately more likely to divorce, can partially explain divorced men’s initial wealth gaps but not the gap for women.I conclude that marital dissolution is a life course event that importantly influences men’s and women’s wealth standings and prospects. More precisely, it is associated with substantial reductions in men’s and women’s personal wealth with lasting economic repercussions for the majority of divorcees. This can, for instance, have flow-on effects on divorcees’ social participation, welfare reliance, or their social network. Deflated wealth by implication also has economic consequences for children, as divorced parents likely have fewer resources that can be passed down. Although my thesis provides an important first step towards a more thorough understanding of the economic consequences of marital dissolution for private wealth, more research is needed to explicate potential within and across country heterogeneity. Overall, my thesis highlights the importance to include wealth in addition to income when assessing the economic wellbeing of divorced families.