Good Thinking

The impact of the economy on family stability

The impact of the economy on family stability
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The Christmas holiday period coincides with a spike in domestic violence, suicides, partnership dissolution and the initiation of divorce proceedings in Christian countries. This year, the economic situation will add more stress as security is high on the agenda of basic human needs and a plummeting of couple's net worth seemingly has dire consequences on family stability. Indeed, remarkable new research from the U.K. Institute for Social and Economic Research (ISER) concludes that there is a direct relationship - for every unexpected 10% fall in housing prices, an extra 5% of couples will split up. Throw in all those share portfolios that have shrunk in value and there's good data to suggest we should not make any rash decisions this holiday period!

The analysis incorporated data from 5000 households across a 14-year period (British Household Panel Survey, BHPS) together with the Halifax House Price Index (HHPI), and shows that this Christmas is likely to be a tough one for a lot of people. The study carried out by research associate Helmut Rainer and his colleague Ian Smith concludes that unexpected downturns in the housing market can damage family stability, and the effects are exacerbated for couples with dependent children, a low family income and high mortgage debt.

To date, there has been little evidence to demonstrate the importance of house prices for couples. Informal speculation in the media has suggested that high and rising property prices might help to keep couples together, as people recognise that, whatever problems they have in their relationship, the prospect of a move down the property ladder is much worse.

Staying together for the sake of the home? House price shocks and partnership dissolution in the UK is the first attempt to measure the impact of unanticipated house price falls and rises on marital stability.

Commenting on the findings, the authors observed: ‘The first effect of negative house price shocks is to reduce directly the wealth of couples who own a property. Falling into negative equity and other economic problems associated with house price falls put pressure on marriages.’

The authors believe the findings will be of considerable interest to policy makers for whom divorce and its consequences are of particular concern. Their study concludes that well designed policies that support low income families such as mortgage interest support or council tax rebates may be the key to reducing the degree to which couples are affected by money lost on their homes.

Notes for editorFor further information contact Chris Garrington, Communications Officer on 0044 1206 874823

This paper explores the importance of unanticipated house price shocks formarital dissolution in the UK using individual household data from the BritishHousehold Panel Survey (BHPS) and county-level house price data from theHalifax House Price Index (HHPI). Results suggest that positive and negativehouse price shocks have asymmetric effects on the probability of partnershipdissolution. Negative house price shocks significantly increase the risk of part-nership dissolution, while positive house price shocks do not have a significanteffect in general. The destabilizing effect of negative house price shocks is par-ticularly pronounced for couples with dependent children, low family income,and high mortgage debt. Results are robust to a wide variety of specifications.

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The result of this research, namely that the family is shown to be inextricably linked to the economy, is further indication of how interconnected and interdependent our world has become. The symptoms we are currently experiencing, financial crisis, breakdown of family, are the results of the flaws in our relationships with one another. To solve these symptoms we must address their common root, Michael Laitman has some interesting insights into this matter and, possibly a solution.