CEDE Seminar - Katarina Kuske

Joint physical custody (co-parenting) is an increasingly popular post-divorce parenting arrangement, and while it benefits children, its economic implications for parents are theoretically ambiguous. I investigate empirically how co-parenting affects parents’ labour market outcomes after divorce, exploiting a custody reform in the Netherlands that encouraged co-parenting and increased its uptake by 7.6 percentage points among parents with young children. I find that mothers who divorce after the reform experience a 0.8% wage decline in an intention-to-treat framework relative to those divorcing before the reform, which implies an average wage loss of about 10% for compliers. This is driven by slower wage growth for mothers in the treatment group, who are less likely to move further away to access better-paid employment. The findings suggest that co-parenting ties both parents to a fixed location, reducing geographical mobility. Treated mothers also reduce their hours temporarily – largely due to rising overtime in the control group – while fathers’ wages and hours remain unaffected. The wage penalty is concentrated among mothers who were secondary earners during marriage and younger at the time of divorce. These patterns are consistent with couples placing greater weight on the primary earner’s career when making location decisions, which makes the post-divorce location constraint under co-parenting bind more tightly for mothers than fathers, thereby widening the gender wage gap. My results indicate an efficiency cost of location constraints under coparenting.