Does the Added Worker Effect Matter?

Nezih Guner, Yuliya Kulikova and Arnau Valladares-Esteban

Review of Economic Dynamics, 2025, vol. 56

Abstract: In the US, the likelihood of a married woman entering the labor force in a given month increases by 60% if her husband loses his job, known as the added worker effect. However, only 1.5% to 3.5% of married women entering the labor force in a given month can be added workers. This raises the question of whether the added worker effect can significantly impact aggregate labor market outcomes. Building on Shimer (2012), we introduce a new methodology to evaluate how joint transitions of married couples across labor market states affect aggregate participation, employment, and unemployment rates. Our results show that the added worker effect significantly impacts aggregate outcomes, increasing married women's participation and employment by 0.72 and 0.65 percentage points each month. Additionally, the added worker effect reduces the cyclicality of married women's participation and unemployment, lowering the correlation between GDP's cyclical components and participation by 4.5 percentage points and unemployment by 8 percentage points. (Copyright: Elsevier)

Keywords: Added Worker Effect; Household Labor Supply; Intra-Household Insurance; Female Employment; Cyclicality (search for similar items in EconPapers)
JEL-codes: D1 E32 J21 J22 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Does the Added Worker Effect Matter? (2020)
Working Paper: Does the Added Worker Effect Matter? (2020)
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DOI: 10.1016/j.red.2025.101271

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