Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers

Serdar Birinci

No 2019-020, Working Papers from Federal Reserve Bank of St. Louis

Abstract: I document a limited spousal earnings response to job displacement of the family head. Using cross-state differences in transfers, I show that the main reason behind this finding is the crowding-out effects of transfers. To study the implications of this interaction between public and private insurance, I develop an incomplete markets model with a frictional labor market, family labor supply, and aggregate shocks. The optimal policy prescribes less generous means-tested and more generous employment-tested transfers, whereas current U.S. policy offers the opposite. The optimal policy mix substantially changes when the model abstracts from the interaction between public and private insurance.

Keywords: unemployment; business cycles; fiscal policy; household behavior; job search (search for similar items in EconPapers)
JEL-codes: E24 E32 H31 J64 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2019-09, Revised 2026-03-04
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
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Citations: View citations in EconPapers (10)

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DOI: 10.20955/wp.2019.020

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