Female Earnings and Divorce Rates: Some Australian Evidence

The purpose of this article is to examine whether female earnings have influenced divorce rates in Australia, using state‐level data for the past four decades. Following a recent study by Ressler and Waters (2000), which concludes from comparable US data that female earnings and divorce rates may be jointly endogenous, initial testing is performed to identify whether female earnings can be treated as exogenous. A Hausman specification error test finds no evidence of a simultaneous relationship in the Australian data, in contrast to the findings of Ressler and Waters. The test result supports the hypothesis that other underlying factors affect female earnings, of which higher divorce rates are merely another symptom. A divorce rate equation is estimated. In accordance with much of the literature, the rise in female earnings over the past four decades is found to have increased Australian divorce rates.     

Discrimination among alternative models of international capital markets

Most empirical capital flow studies have estimated individual models, many by assuming exogenous interest rates. None of these studies has examined interest rate interdependence from the perspective of the models. In this study, a simultaneous equation model of capital flows containing previous models as special cases is estimated using the cross spectral technique of model discrimination. Based on examination of both the flow-differential link and interest rate interdependence resulting from capital flows, the evidence 1) supports a simultaneous equation stock adjustment model, and 2) suggests that interest rate endogeneity may not imply serious simultaneous equation bias for those previous studies which assume exogenous interest rates.     

R&D intensity and multinational involvement

This article considers the relationship between R&D intensity and multinational involvement. Estimation results suggest that previous studies adopting single equation methods may be subject to simultaneous equations bias.     

A test for the presence of central bank intervention in the foreign exchange market with an application to the Bank of Canada

In this article, a general nonlinear simultaneous equations framework for the econometric analysis of models of intervention in foreign exchange markets by central banks in response to deviations of exchange rates from target levels is proposed. The instrumental variables estimation of possibly nonlinear response functions and tests of intervention, when the functional form may be nonlinear, asymmetric, and may contain unknown shape parameters, is considered. The methodology applies techniques developed for testing in the presence of nuisance parameters unidentified under a null hypothesis to a nonlinear simultaneous equations model. The results of an empirical analysis of stabilization activity of the Bank of Canada, for the period from 1953 to 2009, with regard to the Canada–U.S exchange rate are reported here. A nonlinear specification is found necessary to capture activity after 1998.     

A dynamic Mincer equation with an application to Portuguese data

This article argues in favour of a dynamic specification of the Mincer equation, where the past observed earnings play the role of additional explanatory variable for current observed earnings. A dynamic approach offers an explanation why the return to schooling in terms of observed earnings is not independent of labour-market experience, as suggested by some recent empirical evidence for the United States.     

Estimating Savings and Growth Functions in Developing Economies: A Simultaneous Equations Approach

There is a two-way influence between the savings rate on the one hand and some of its determinants on the other (i.e. a problem of simultaneity exists). This study specifies a general production function to generate a growth rate function, and estimates savings and growth equations simultaneously. A Hausman specification test examines the correct system specification, and determines whether 2SLS or 3SLS is the appropriate estimation technique. The results show that a simultaneous equations model is a better estimation technique (2SLS or 3SLS) than a single equation system (OLS), and that the full-information method (3SLS) provides better estimates than a limited-information method (2SLS). [C30]     

Explaining the Growth of Divorce in Great Britain

This paper tests whether the liberalisation of divorce law or economic factors can explain the post-war growth of divorce rates in Great Britain. Timing differences regarding the dates of legal innovations in England & Wales relative to Scotland are exploited to test for divorce law effects. No effect on marital dissolution of extending the grounds for the divorce can be detected, though other innovations in family law have had a powerful but generally temporary impact on divorce rates via their effect on transaction costs and settlement rules. Economic theory suggests that rising relative wages of women have reduced the gains from remaining married by inter alia diminishing the benefits of household specialisation and that rising real earnings of women have increased post divorce welfare by providing a measure of financial independence. The results are consistent with the real, but not the relative, wage hypothesis.     

Pitfalls in Including Current Earnings in Labour Market Choice Estimating Equations

This paper examines the conditions under which an empirical model of employment choice based on the differential in current earnings is an adequate specification when the theoretical model suggests the use of the difference in present values of the stream of lifetime earnings. The difference between the two approaches is shown to be variables for the growth rates of earnings in the employment states over which choice is being made.     

Work experience,earnings and participation: evidence from the women and employment survey

This paper presents a probit model of labour force participation and a set of earnings equations estimated using data from the 1980 Women and Employment Survey. The results of the participation model compare with previous findings and the earnings models give typical results of human capital and job characteristics variables. Exclusion of the sample selection effect appears to be of importance and a linear piecewise experience variable outperforms the quadratic specification.     

Returns to education: the Greek experience, 1988–1999

This article provides estimates of private rates of return to education in Greece derived from Mincerian-type earnings equations. The data come from the latest three household surveys of the country covering the 1988 to 1999 period. The empirical evidence suggests that: rates of return associated with female high school and university graduates exceed the respective rates for male graduates; rates of return pertaining to tertiary education graduates are increasing over time, whereas the corresponding rates for secondary education graduates follow an inverted U-shaped pattern and dropouts from any education degree end up with rates of return lower than the rates associated with the immediately preceding education level.     

Divorce as a risky prospect

In 1910, the divorce rate per 1000 members of the US population stood at 0.9. ^{1 1}Histroical divorce rates can be found in the Statistical Abstract for the US (1981). . This rate showed a slow upward trend for the next 50 years, and by 1960 had more than doubled to 2.2. It took only 20 years for the rate to more than double again so that by 1980, the rate was 5.3. For the last 20 years, the marriage rate, by contrast, has experienced mild fluctuations between 10.0 and 11.0 per 1000 in the population with no discernible trend. If the same pattern for both rates holds until the year 2000, the annual number of divorces will exceed the annual number of marriages.

Although sociologists have researched divorce extensively, only a few economic studies exist. This is unfortunate since divorce is likely to have considerable impact on economic vaiables such as hours of work, labour force participation, human capital accumulation, work performance and earnings. ^{2 2}For a recent study of hours at work and labour supply, see Green and Quester (1982); for studies on earnings and work performance, see Santos (1975) or Hoffman and Holmes (1976). King (1982) argues that couples anticipating divorce will individually invest more heavily in human capital since the costs of any current investment are at least partially absorbed by the spouse. Without denying the influences of peer groups, social norms and role models, it seems reasonable to suggest that pecuniary considerations may also help to explain divorce.

A search through the economics literature uncovered only two studies of the determinants as opposed to the implications of divorce: one by Orcutt, Caldwell and Wertheimer (1976) and another by Becker, Landes and Michael (BLM) (1977). The study by BLM is by far the most widely cited of the two. The authors of both studies argue that the current state of marriage is the primary determinant of divorce. BLM, for example, assert that ‘the probability of divorce is smaller the greater the expected gain from marriage, and the smaller the variance of the distribution of unanticipated gains from marriage’. BLM, in other words, view marriage as a risky investment with a distribution of returns. The alternative is divorce which, by implication in BLM, involves a certain return.

The first contribution of this study is to draw the implications for an alternative view in which the investment in marraige is certain, but the investment in divorce is risky.

The second contribution lies in presenting formal expected utility-maximizing models of an individual and/or a couple contemplating divorce which can be tested empirically. The thrid contribution is the method developed to test the predictions of the models.

The paper of follows a simple format. Section I presents the models. Section II provides an explanation of the data used in the empirical tests. Methodology and results are presented in sections III and IV. Caveats are observed in section V. The final section closed with a summary of the arguments and evidence.     

Three stage least squares with inequality constraints: Auto theft and police expenditure

Using behavorial models of utility maximization on the part of communities and criminals, a two equation model of police expenditure and auto theft is derived. On the basis of previous empirical work and economic theory, certain parameters should be estimated subject to inequality constraints. An appropriate simultaneous equations estimator is derived and applied to data for 230 communities in New Jersey.     

Take–up of Means–tested Benefits and Labour Supply

This paper examines take–up rates in a model in which there is a fixed non–refundable cost of applying for benefits. The model involves a joint decision regarding both labour supply and the take–up of the benefit. There is a single means–tested benefit involving a 'taper rate' at which benefits are withdrawn as earnings increase. It is found that take–up increases as the level of the taper rate increases, and the value of benefits increases. The achievement of 100% take–up is associated with labour supply responses whereby there are few, if any, individuals who are both working and eligible for benefits. The results have implications for the effects of lowering the taper rate on the costs and effective targeting of benefits.     

Explaining divorce rate determinants: new evidence from Spain

This article examines the main determinants of divorce rates in Spain for the period 1995 to 2010. According to the results, the so-called Express Divorce Law (passed in 2005) seems to be positively associated with divorce rates in the short term. Income level and growth, female employment rate, and the proportion of foreign population are also positively related to divorce rates. However, as expected, the percentage of conservative vote seems to have a negative impact.     

Till Death Do Us Part or I Get My Pension? Wives' Pension Holding and Marital Dissolution in the United States

Wives' financial independence gained from their pension may increase the risk of marital dissolution, especially when wives are approaching retirement age (the older wives' independence hypothesis). Applying single and simultaneous equations probit models to data from the Panel Study of Income Dynamics, we investigate the effect of wives' pension holding in 1984 on the risk of subsequent marital dissolution. Results from the single equation model appear to support the older wives' independence hypothesis. However, results from the simultaneous equations model suggest that interpreting the single equation results as a sign of older wives' economic independence may be misleading.
JEL classification : C 33; D 31; J 12; J 32     

Testing the dynamic specification of an econometric model with an application to Belgian data

In this paper, we analyze the Final Equation and Transfer Function form associated with a linear dynamic simultaneous equation model and use the empirical findings as a guidance to a structural form specification in accordance with the information in a sample of monthly Belgian data.     

The rebound effect: Microeconomic definitions, limitations and extensions

The rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services. This increased consumption offsets the energy savings that may otherwise be achieved. If the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency.The nature and magnitude of the rebound effect is the focus of long-running dispute with energy economics. This paper brings together previous theoretical work to provide a rigorous definition of the rebound effect, to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect. The focus is on the direct rebound effect for a single energy service — indirect and economy-wide rebound effects are not discussed.Beginning with Khazzoom's original definition of the rebound effect, we expose the limitations of three simplifying assumptions on which this definition is based. First, we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias. Second, we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables. Third, we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved ‘time efficiency’, the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time. Each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for. We discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect.     

Complementary association between real activities and accruals-based manipulation in earnings reporting

Extant studies focus on examining the developed capital markets and reveal mixed results for the association between real activities versus accruals-based earnings management. This study establishes a set of simultaneous equations that captures managers’ behaviors to boost (or suppress) earnings performance to examine whether real activities and discretionary accruals play mutually complement roles in earnings reporting in Taiwan. The two-stage least squares regressions results reveal that the realactivities manipulation comprehensive measure is positively associated with discretionary accruals and supports the complement hypothesis. It suggests that managers jointly and simultaneously use these two tools in strategic earnings reporting decisions.     

What caused earnings inequality to increase in Canada during the 1980s?

While broad consensus exists that earnings inequality increasedin Canada during the 1980s, as in other industrialised countries,there is little agreement about the causes. The main contributionof this paper is the simultaneous, empirical examination ofeight hypotheses of increased earnings inequality, using multivariateregression analysis, namely: the decline in unionisation, minimumwages and industrialisation, as well as the increase in unemployment,trade, relative supply of university-educated workers and relativesupply of female workers, and technological change. In Canada,during the 1980s, employment and unionisation factors stronglyand consistently explain the increase in annual earnings andhourly wage-rate inequality, after controlling for six otherpossible determinants. The results also point to the importanceof considering a multidimensional explanation of increased earningsinequality and avoiding generalisations across gender, incomeand work status groups.     

A multiple time-series analysis of labor supply and earnings in economic development

Using multivariate time-series techniques, the dynamics of male and female labor supply and earnings in Puerto Rico are examined during a period of rapid economic developemnt, 1953–1978. The temporal analysis suggests that aggregate male and female labor force participation rates are exogenous to male and female earnings. In addition, continous declines in male participation have been partly responsible for increases in both male and female earnings and a narrowing of relative earnings differentials. The study also finds that the advent of the Food Stamp Program in 1975 has resulted in a small reduction in male labor force participation. Moreover, the inclusion of food stamps as an intervention component is quite useful in forecasting the male participation rate. The forecasting accuracy of univariate and multivariate models is assessed with the result that, in every instance, the multivariate transfer functions prove superior. Overall, the results support the incorporation of multiple time-series in econometric studies of developing countries and provide evidence of its usefullness for development planning and policy.