The Insurance Role of Household Labor Supply for Older Workers

25 Pages Posted: 20 Dec 2014

See all articles by Yanan Li

Yanan Li

Beijing Normal University (BNU) - School of Economics and Business Administration

Victoria L. Prowse

Purdue University - Department of Economics; IZA Institute of Labor Economics; German Institute for Economic Research (DIW Berlin)

Date Written: September 1, 2014

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 households. 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.

Keywords: Added worker effect, Household labor supply, Unemployment, Retirement, Aging, Older workers, Employment risk, Intra-household insurance, Propensity score matching

JEL Classification: J14, J26, J63, J64

Suggested Citation

Li, Yanan and Prowse, Victoria L., The Insurance Role of Household Labor Supply for Older Workers (September 1, 2014). Michigan Retirement Research Center Research Paper No. 2014-309, Available at SSRN: https://ssrn.com/abstract=2540649 or http://dx.doi.org/10.2139/ssrn.2540649

Yanan Li (Contact Author)

Beijing Normal University (BNU) - School of Economics and Business Administration ( email )

No.19 Xinwai Str
Haidian District
Beijing, 100875
China

Victoria L. Prowse

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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