There has been widespread interest in the consequences of this latest economic recession in the United States on marital stability. In fact, researchers going at least as far back as the 1920s have speculated that divorce rates might decline in times of economic recession. Given this long history, there is surprisingly little formal empirical evidence on whether such a link exists, let alone its magnitude if it does. In contrast to the relatively sparse literature on the link between business cycles and marital instability, there is a large literature showing that family-level economic shocks (such as job loss) increase the probability of marital dissolution. Whether divorce rates are pro-cyclical or counter-cyclical is ambiguous theoretically. In this research, we will conduct a detailed empirical examination of the impact of macroeconomic conditions on marital dissolution, comparing and contrasting it with the impact of family-specific shocks on marital dissolution and considering interactions of the two. Our research will answer the following questions: Do macroeconomic shocks affect marital dissolution? Do they attenuate or exacerbate household-level shocks? Are the effects homogeneous across families with different demographic characteristics, of which at least some are known to be linked to divorce? Knowing the answers to these questions will not only allow us to go beyond anecdotes about the recent economic downturn, but it will also lead to a better understanding of the factors leading to divorce. Using data from the Panel Study of Income Dynamics (PSID), we will estimate individual-level discrete time hazard models (with unobserved heterogeneity) of exit from first marriage into divorce (or, alternatively, into separation). We will incorporate into the models demographic characteristics that are known or suspected to affect marital stability and that are measured in the PSID. These include time-invariant demographic characteristics of the couple such as race, education, religiosity, and state of residence. Importantly, we will also include time-varying characteristics such as age, number and ages of children at home, and various measure of the health of family members. In addition, we will incorporate economic characteristics of the family that are known or suspected to affect marital stability such as employment status of the husband and wife, wealth, and home ownership status. We will also include a smooth function of years since marriage and time-varying measures of local macroeconomic conditions such as the state-level unemployment rate in each year and we will incorporate unobserved individual heterogeneity as in Heckman and Singer (1984). Finally, we will incorporate interactions of the measured factors into the models we estimate. PUBLIC HEALTH RELEVANCE: This project will help us understand the factors leading to divorce. It will demonstrate how macroeconomic conditions affect the probability of divorce, and how demographic characteristics of families affect divorce and are mitigated or accentuated by macroeconomic conditions.