Spousal Insurance, Precautionary Labor Supply, and the Business Cycle - A Quantitative Analysis
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Kathrin Ellieroth: Indiana University Bloomington
No 1134, 2019 Meeting Papers from Society for Economic Dynamics
I document that aggregate hours worked and employment are significantly less cyclical for married women than for married men and single women. Married women are less likely to leave the labor force and are more attached to employment in recessions. Furthermore, I show that men have a strongly countercyclical job loss probability. Using a two-person household model with labor market frictions, I show that married women exhibit precautionary labor supply in response to the higher threat of job loss experienced by their husband in recessions and thus, offer spousal insurance. The cyclicality of men’s job loss probability accounts for the majority of married women’s low cyclicality of employment.
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