Fathers' Financial and in-Kind Contributions and Unemployment through the Great Recession
Thursday, November 12, 2015 : 4:10 PM
Merrick II (Hyatt Regency Miami)
*Names in bold indicate Presenter
Economic factors are some of the primary determinants of child support. There is a large literature on the determinants of fathers’ financial and non-financial involvement in the lives of their children. Unfortunately, changes in unemployment rates have not played a prominent role in this literature. Economic downturns affect non-resident fathers’ financial contributions through their effects on earnings, which most studies control or proxy through demographic and human capital characteristics (e.g. race, and education). Studies that have explored the effect of unemployment on child support used unemployment rates at mothers' location to represent relevant labor market conditions finding no significant results. Using previously unavailable data of fathers' residence from the Fragile Families and Child Wellbeing Study and multiple imputation techniques, we estimate the reduced-form association between aggregate unemployment at fathers’ labor markets and child support. Our main contribution is to provide a more accurate specification of the unemployment rate, and an augmented sample size that yield more precise estimates of the impact of the economic recession on formal, informal, and in-kind child support. Data includes the period 1998 to 2010, which brackets a minor setback of the economy in 2001 and the Great Recession (2007-2009). The substantial variation in unemployment rates over time and across cities in the Fragile Families data gives a unique opportunity to understand the effects of the recession on child support payments. For all outcome measures we show results using two specifications of the unemployment rate: at fathers’ and at mothers’ labor markets. Our empirical strategy consists of a fixed effects model with time, city, and individual controls to account for unmeasured, individual-specific factors that are constant over time and across cities. As a robustness check we also use a model that corrects for selection into non-residency and results are similar in magnitude. Results show that the association between aggregate unemployment and child support is negative and significant only in the case of formal payments. A one-percentage point increase in unemployment at a father's labor market is associated with a $63 dollar decrease in formal child support payments. To predict the effect of the Great Recession we estimate predicted child support provision for year 2007-2010 assuming the unemployment rate at a father’s labor market is 5% and compare that to predictions under a 10% unemployment rate. A 5-percentage point increase in unemployment is associated to a $284 decrease in formal child support payments, an $83 decrease in informal payments, and a 2% decrease in the probability of paying in-kind support. These predicted changes are statistically significant. In all cases in which the association was significant, using the unemployment rate at mothers' location provided weaker results. In sum, our results show that the Great Recession appears to have exacerbated the decline in nonresident fathers’ support and involvement in the lives of their children. Evidence from this study also suggests that using a measure of unemployment at mothers' and not at fathers' labor markets provides inaccurate estimates of the effect of unemployment on compliance that reflect attenuation bias.