Benefit System and Marriage Dissolution Among Working Families

In this paper I use a tax and benefit micro-simulator of the U.K. welfare system to study the the effect of marriage penalties created by the welfare state on the probability of divorce. The welfare system in the U.K subsidises the lone parenthood and the marriage penalties created by the system are found to be higher among low earning households. With the help of the tax and benefit simulator, I impute the counterfactual effect of divorce on the net benefit entitlements of a sub sample of working families. Based on theoretical literature, increasing public support for unmarried mothers should increase the prevalence of singleheaded households. The results suggest that £100 weekly increase in marriage penalties is needed to increase probability of divorce by around 0.7%