Working Paper

Parental Separation and the Formation of Economic Preferences

Published: 2022

Non-technical Summary

Parental separation can be a highly disruptive experience, which may leave a lasting impression on children’s preferences, such as their willingness to take risk and trust in other people. In this paper we estimate the effect of parental separation on the risk and trust attitudes of adolescents. Our definition of parental separation is living in a household that does not include both parents, which includes births into single parent households.

Our study uses a large, representative German household survey. A key strength of our data is the ability to link parents with children. We find that in the year they turn 17, children whose parents separated are less trusting than those whose parents did not separate. This result holds even after controlling for the trust levels of fathers and mothers, as well as an extensive set of other controls, with an effect size of 0.07 standard deviations. The effect size is large relative to other important covariates; it amounts to approximately 70% of the impact of being from an immigrant background and is equivalent to the effect of a 0.42 standard deviation decrease in maternal trust. This effect also persists into early adulthood, and is stronger if the separation occurs when the child is younger. In contrast, we find no statistically significant effect on risk attitudes.

We also explore the extent to which parental separation attenuates the intergenerational transmission of risk and trust attitudes. We find that parental separation weakens the transmission of both risk and trust attitudes, especially from father to child. This is consistent with the fact that in separated families, fathers are less likely to be the primary caregiver and are therefore likely to be less directly influential.

Our results imply that lower trust is a possible risk factor associated with parental separation, especially for young children. Parents, and other prominent people in the lives of children, should be mindful of this, and take actions to foster trust following a separation. Previous research suggests that one way parents can influence their children’s trust is by having strong involvement and maintaining good relationships with their child. Another benefit to this is that it may reduce dissimilarity in preferences between parents and children, which could improve parent/child relationships.

Authors

Dahmann S.Kettlewell N.Lam J.

Dahmann, S.C., Kettlewell, N., & Lam, J. (2022). ‘Parental Separation and the Formation of Economic Preferences’, Life Course Centre Working Paper Series, 2022-02, Institute for Social Science Research, The University of Queensland.