Spousal spillovers in the labor market: A structural assessment

Sigurd Galaasen and Herman Kruse
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Sigurd Galaasen: Norges Bank
Herman Kruse: Statistics Norway

Review of Economic Dynamics, 2025, vol. 58

Abstract: We explore the importance and nature of elderly couples' labor market interlinkages, and how such linkages shape the response to welfare reforms. To this end, we develop a life-cycle model featuring dual-earner households with heterogeneous age gaps, non-separable leisure preferences, and endogenous retirement. To inform key preference parameters, our calibration exploits quasi-experimental evidence of spousal retirement spillovers from a pension reform in Norway. We show that the experimental evidence is highly informative about the degree of non-separability of leisure and that a substantial level of complementarity is required to match the data. Using our calibrated model, we find that the commonly observed tendency of couples to retire together, despite considerable age-gap heterogeneity, can be entirely explained by leisure complementarities. Moreover, comparing to a model with leisure separability reveals that one-third of the long-run labor supply effect of the pension reform is attributed to complementarity. This illustrates the importance of accounting for interdependent decisions when evaluating policy reforms. (Copyright: Elsevier)

Keywords: Joint retirement; Couples; Life cycle; Pension reform; Leisure complementarity; Spousal spillover (search for similar items in EconPapers)
JEL-codes: D15 E2 E6 E65 H55 J08 J2 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.red.2025.101300

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