Abstract

Parents who raise their children without a spouse make up a substantial and rising share of all families in the United States. Notably, a large fraction of single mothers live in poverty with their children. This suggests that the current welfare state does not provide sufficient insurance against the risk of becoming a single parent. Moreover, the US tax code provides incentives for marriage and the auxiliary social security benefit system favors married women over singles. We develop a life cycle model of couples and singles where individuals decide their marital state and females face the probability of getting children. Both of these events govern the likelihood of becoming a single mother and ending up in poverty. We seek to understand why such a large fraction of single mothers fall into poverty, and to evaluate policy reforms that reduce poverty, such as free child care, taking the behavioral effects on labor supply and marital transitions into account.

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