The Insurance Role of Household Labor Supply for Older Workers
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Abstract
In this paper, we explore and compare how older and younger couple households use adjustments in the wife’s labor supply to mitigate the effects of negative shocks to the husband’s employment status. Using difference-in-differences matching methods, we document a substantial added worker effect for younger house- holds. However, the wives of older men do not increase employment in response to their husbands’ negative employment shocks. Instead, in older households, female unemployment increases. These results are consistent with older women being constrained by the labor market in the extent to which they can adjust their labor supply to mitigate the effects of spousal employment shocks. Our findings suggest that spousal labor supply is not an effective intra-household insurance device for older households.
Key Findings
- Following the husband losing his job, the wife’s likelihood of employment increases in younger households, but not in older households.
- In older households, the likelihood of the wife being unemployed increases following the husband’s job loss.
- Our findings are consistent with older women being constrained by the labor market in the extent to which they can adjust their labor supply to mitigate the effects of spousal employment shocks, and suggest that spousal labor supply is not an effective intra-household insurance device for older households. These findings point to the particular importance of social insurance programs, such as Social Security and Disability Insurance, for older households.
Citation
Li, Yanan and Victoria Prowse. 2014. "The Insurance Role of Household Labor Supply for Older Workers." University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2014-309. Ann Arbor, MI. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp309.pdf
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Paper ID
WP 2014-309Publication Type
Working Paper