Does the Added Worker Effect Matter?

55 Pages Posted: 18 Mar 2021

See all articles by Nezih Guner

Nezih Guner

Centre for Monetary and Financial Studies (CEMFI)

Yuliy Kulikova

Autonomous University of Barcelona

Arnau Valladares-Esteban

University of St. Gallen

Multiple version iconThere are 3 versions of this paper

Date Written: March 17, 2021

Abstract

The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners’ adverse labor market outcomes. We propose a new method to calculate the AWE that allows us to estimate its effect on any labor market outcome. The AWE reduces the fraction of households with two non-employed members by 16% for the 1977-2018 period; 28% in the 1990 recession and 23% during the great recession. The AWE also accounts for why women’s employment is much less cyclical and more symmetric than men’s. Without the AWE, married women’s employment would be as volatile as men and display negative skewness (declining quickly in recessions and recovering slowly in expansions). In recessions, while some women lose their employment, others enter the labor market and find jobs. This keeps female employment relatively stable.

Keywords: added worker effect, household labor supply, intra-household insurance, female employment, cyclicality, skewness

JEL Classification: D1, E32, J21, J22

Suggested Citation

Guner, Nezih and Kulikova, Yuliy and Valladares-Esteban, Arnau, Does the Added Worker Effect Matter? (March 17, 2021). Banco de Espana Working Paper No. 2113, Available at SSRN: https://ssrn.com/abstract=3806537 or http://dx.doi.org/10.2139/ssrn.3806537

Nezih Guner (Contact Author)

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

Yuliy Kulikova

Autonomous University of Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain

Arnau Valladares-Esteban

University of St. Gallen ( email )

Varnbülstrasse 14
SEW-HSG
St.Gallen, 9000
Switzerland

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