Divorce and the Cognitive Achievement of Children Melissa Tartari z Yale University November, 2006 Abstract It is commonly thought that divorce adversely a®ects child outcomes. Children of divorced parents exhibit lower test scores and lower educational attainment. A fundamental question is whether these correlations have a causal interpretation. Parents who divorce may also be less likely to invest in their children while together. Alternatively, they may choose to divorce to shield their children from the e®ects of marital conflict. The goal of this paper is to understand what generates the observed di®erences in children's cognitive achievement by their parents' marital status. I study the relationship between marital status and a child's cognitive achievement within a dynamic framework in which partners decide on whether to remain married, how to interact (with or without conflict), fertility, labor supply, time spent with their children, and child support transfers. Using the estimated behavioral model, I assess whether a child whose parents divorced would have been better o® had divorce not been an option. I also consider the e®ects of pro-marriage policies, such as a bonus paid to low income married couples. Finally, I evaluate how better enforcement of existing child support guidelines would a®ect a child's cognitive achievement, taking into account induced changes in within-marriage behavior. Keywords: Divorce, Children, Cognitive Achievement, Dynamic Discrete Choice JEL Classi¯cation: J12, J13, J22 zI am immensely grateful to Antonio Merlo, John Knowles, Petra Todd, and especially to my main advisor Ken Wolpin. I also thank Aureo de Paula and Kyungchul Song. Donghoon Lee was so kind as to let me use his simplex routine for MPI. 1 1 Introduction Approximately four out of ten children will experience the divorce of their parents before reaching adulthood and roughly 1.5 million children experience their parents' divorce every year in the U.S. (Kreider and Fields (2005)). These statistics raise concerns because a large empirical literature in sociology, developmental psychology, and economics shows that o®spring of divorced parents fare worse than o®spring of married parents along many dimensions. For instance, conditional on observed family characteristics, children of divorced parents tend to have lower test scores, lower educational achievement, and a higher likelihood of dropping-out of high school.1 The negative association between divorce and a variety of child outcomes is the basis of a renewed interest by Federal, state, and local governments in the family. Speci¯cally, the belief that a two-parent family is the best environment for raising children is reflected in recent public policies. For example, the reform of the AFDC program in the mid 1990s gave a more favorable treatment to two-parent families both in terms of eligibility and work-requirements. Many states have also initiated new programs to foster marriage. In West Virginia, for example, low-income couples receive a $100 bonus for every month they remain married, and similar bonus programs are currently under consideration in other states. At the Federal level, the promotion of \healthy" marriages is on the current administration's agenda in the form of \Promoting Safe and Stable Families," a program which entails spending $1.5 billion to implement marriage-promoting activities.2 A di±culty with pro-marriage policies is that there is substantial evidence from child psychology that interparental conflict is bad for children, and such policies may promote conflict-ridden marriages. Speci¯cally, conflict in marital relationships has been linked with children's adjustment problems (in the form of aggression and conduct issues, anxiety, depression, withdrawal, and low-self esteem) as well as academic problems.3 Indeed, the literature that studies the relationship between interparental conflict and child development ¯nds that \interparental conflict is a better predictor of children's adjustment problems than marital dissolution" (cfr. Grych and Fincham (2001) page 1). In light of this discussion, the natural question to ask is: Would a child whose parents divorced have been better o® had the child's parents stayed together? To shed some initial light on this question, I next describe some characteristics of children and their families pre and post divorce. Figures 1 and 2 are based on mother and child observations from the National Longitudinal Survey of Youth 1979 (henceforth NSLY79) and a linked data set, the NSLY79 Children and Young Adult (henceforth NLSY79 CHYA). Figure 1 shows the score of a child on the PIAT4 math test by current and eventual marital status of the parents. Comparing children of currently divorced parents to children of currently married parents, we observe the typical negative gap. Interestingly, a sizeable part of this gap is already present during marriage: children whose parents will divorce in the future have scores that are very close to the scores of children of currently divorced parents.5 Figure 2 shows mothers' labor supply by current and eventual marital status. If we regard time spent working as a measure of time not spent with a child, there are two features worth observing. The ¯rst is the gap between children of currently divorced versus currently married parents: children of divorced parents receive less maternal time inputs. Second, the time spent with children by mothers who will divorce in the future and by currently divorced mothers are very similar. The descriptive analysis conveys two messages.6 First, taken together, the two ¯gures suggest that 1For an overview of existing studies, see Haveman and Wolfe (1995) and Amato (2005). 2See Carasso and Steuerle (2005) and Nock (2005). 3See e.g. Amato et al. (1995), Jekielek (1998), Hanson (1999), Booth et al. (2001), Grych and Fincham (2001). 4Peabody Picture Vocabulary Test. 5This descriptive ¯nding is consistent with the analysis in Piketty (2004) using French data. 6The patterns that emerge from Figures 1 and 2 do not seem to be speci¯c to the particular choice of a child's outcome (score in a math test) or measure of inputs invested in a child (labor supply of the child's mother). For instance, Figures 3 and 4 show similar patters. These ¯gures focus, respectively, on an index of behavior problems a child exhibits and on the Home score which is an aggregate measure of the quality of a child's home environment. See also Cherlin et al. (1991), Piketty (2004), and de Galdeano and Vuri (2004). 2 comparing children's outcomes based only on contemporaneous marital status (or marital status at a speci¯c child's age) provides an incomplete picture of the relationship between family structure and child outcomes. Second, there may be several explanations for the observed patterns and these explanations may have di®erent implications as to whether a child whose parents divorced would have been better o® had divorce not occurred. A ¯rst possible explanation is that there is permanent heterogeneity in the population of parents and the decision to divorce is selective on this heterogeneity. For instance, parents who attach less value to the wellbeing of their children may also be more likely to divorce. If so, the pool of divorcees would tend to be composed of parents who, even when together, invest less in their children. In this case, children would have experienced the same outcomes had the parents not had the option of divorcing. An alternative plausible explanation for the patterns in the ¯gures is that forward looking parents experi- ence shocks that increase the future probability of divorce and that this reduces child investments. Eliminating the possibility of divorce could, in this case, lead to an improvement in child outcomes. As a third explana- tion, consider the case in which parents who attach more value to their children choose to divorce to insulate their children from the conflict in their marriage. The expectation of divorce might alter input choices during marriage, and a policy that forces them to stay together could either improve or worsen child outcomes. There are two main di±culties in ascertaining whether a child whose parents divorced would have been better o® had the parents stayed together. First, it is a counterfactual question that requires considering a scenario that is not realized. Even if it were possible to exogenously assign parents' marital status, such an experiment would only be informative about mean child outcomes and not about their distribution. Second, as Figures 1 and 2 would suggest, it may matter at what point, in the life of a couple or a child the divorce occurs. Quantifying the e®ect that forcing (otherwise divorced) parents to remain together would have on a child is interesting as a thought experiment, but is not a realistic policy. Therefore, another goal of this paper is to understand the impacts of implementable family policies such as monetary incentives to stay married and better enforcement of existing state child support guidelines. To study the e®ects of these policies, we need to know how family structure and children's outcomes are jointly determined. The questions addressed in this paper are: (1) would a child whose parents divorced have been better o® had the child's parents stayed together?, (2) through what mechanism are children better or worse o® when family structure changes?, (3) how do (existing or implementable counterfactual) policies that change parents' incentives to stay married a®ect the wellbeing of children?. To address these questions, I develop and estimate a sequential model of a couple's behavior from marriage onwards. In the model, parents value the quality of their children (a public good), which they can increase by investing inputs in the form of parental time, goods, and quality (absence or presence of conflict) of the marital relationship.