Joint Search over the Life Cycle

Annika Bacher (), Philipp Gr bener () and Lukas Nord ()

No 05/2024, Working Papers from Centre for Household Finance and Macroeconomic Research (HOFIMAR), BI Norwegian Business School

Abstract: This paper provides novel evidence that the added worker effect labor force entry upon spousal job loss is substantially stronger for young than old households. Using a life cycle model of two-member households in a frictional labor market, we study whether this age-dependency is driven by heterogeneous needs for or availability of spousal insurance. Our framework endogenizes asset and human capital accumulation, as well as arrival rates of job offers, and is diciplined against U.S. micro data. By means of counterfactuals, we find a strong complementarity across both margins: A large added worker effect requires both high spousal earnings potential (human capital) relative to the primary earner and limited access to other means of self insurance (assets). Together, both margins can account for the observed age differential in the added worker effect. The model predicts substantial crowding out of spousal labor supply by unemployment benefit extensions among young households, in line with their stronger need for spousal insurance

Keywords: Unemployment; search; added worker effect; life cycle; family insurance (search for similar items in EconPapers)
Pages: 59 pages
Date: 2024
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:bbq:wpaper:0012

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