The Association between the Underground Economy and Fathers' Marital Behavior

Christina M. Gibson-Davis, Duke University

This study analyzes how male participation in the underground economy affects union formation and dissolution. Data come from the Fragile Families and Child Wellbeing Survey, a longitudinal birth cohort study that collected information on fathers’ informal and formal labor market patterns. I hypothesize that participation in the underground economy may equalize the earning differences between married and unmarried men, and influence union formation or dissolution depending on the perceived fungibility of the informal and formal labor market. Results suggest that earning differences between married and unmarried fathers are only exacerbated by the underground economy, as married fathers earn more money from their underground activities. Furthermore, while participation in the informal economy does not hasten the transition to marriage, it may encourage couples to dissolve their relationship. This implies that couples take a negative view of under-the-table jobs, and do not believe that they can be substituted for regular sector employment.