The Economic Consequences of Marital Separation for Parents in New Zealand: Insights from a Large Administrative Dataset

Abstract

Abstract Marital separation, especially when dependent children are involved, is a significant and disruptive event that often involves considerable changes in living standards. This article uses a newly available dataset to provide, for the first time, estimates of the short- to medium-term economic impacts of marital separation for parents of dependent-aged children in New Zealand. Unlike most similar studies, which are based on relatively small samples of separating individuals drawn from panel surveys, we exploit a large database of longitudinal tax and welfare records. This allows us to examine the economic consequences of separation for approximately 16,000 New Zealand parents and carers of dependent-aged children who separated in a 12-month period. The analysis applies propensity score matching, combined with difference-in-differences estimation, to estimate impacts. We find an average 29 per cent first-year decline in equivalised incomes for separating women and a 15 per cent average rise for men. In both cases, the effects persist to the end of the study period three years after separation. Our results also show a significant rise in poverty rates for both men and women, relatively small changes in employment and earnings, and a large increase in welfare receipts among the women.