DIVORCE LAW REFORMS AND DIVORCE RATES IN THE USA: AN INTERACTIVE FIXED-EFFECTS APPROACH
Version of Record online: 7 JAN 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 29, Issue 2, pages 231–245, March 2014
How to Cite
Kim, D. and Oka, T. (2014), DIVORCE LAW REFORMS AND DIVORCE RATES IN THE USA: AN INTERACTIVE FIXED-EFFECTS APPROACH. J. Appl. Econ., 29: 231–245. doi: 10.1002/jae.2310
- Issue online: 7 MAR 2014
- Version of Record online: 7 JAN 2013
- Manuscript Revised: 4 JUL 2012
- Manuscript Received: 17 SEP 2011
This paper estimates the effects of unilateral divorce laws on divorce rates in the USA from a panel of state-level divorce rates. We use the interactive fixed-effects model to address the issue of endogeneity due to the association between cross-state unobserved heterogeneity and divorce law reforms. We document that earlier studies in the literature do not fully control for unobserved heterogeneity and result in mixed empirical evidence on the effects of divorce law reforms. While reconciling these conflicting results, our results suggest that divorce law reforms have temporal positive effects on divorce rates, thus confirming the 2006 findings of Wolfers. Via simulation experiments, we assess the degree to which faulty inclusion or faulty exclusion of interactive fixed effects affects the policy effect estimators. Our results suggest that faulty inclusion only results in efficiency loss whereas faulty exclusion causes bias. Copyright © 2013 John Wiley & Sons, Ltd.