Who Picks Up the Slack? Understanding Spousal Responses to Unemployment Spells

55 Pages Posted: 10 May 2022

See all articles by Laura Kawano

Laura Kawano

University of Michigan at Ann Arbor

Sara LaLumia

Williams College - Department of Economics

Shanthi Ramnath

Federal Reserve Bank of Chicago

Michael Stevens

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: May 4, 2022

Abstract

We use a large panel of married households to update estimated added worker effects. In response to a primary earner's job loss, secondary earners are 3 percentage points more likely to work and compensate for 6% of the displaced worker's lost earnings. When a secondary earner is displaced, spousal labor force participation is unchanged but there is a substantial earnings reduction. These small compensatory responses are explained by an increased probability that the nondisplaced spouse exits employment, either through correlated unemployment shocks or retirement. Conditional on relative-earner status within the couple, the gender-based differences in added worker effects are small.

JEL Classification: D13, H31, J60

Suggested Citation

Kawano, Laura and LaLumia, Sara and Ramnath, Shanthi and Stevens, Michael, Who Picks Up the Slack? Understanding Spousal Responses to Unemployment Spells (May 4, 2022). Available at SSRN: https://ssrn.com/abstract=4100414 or http://dx.doi.org/10.2139/ssrn.4100414

Laura Kawano (Contact Author)

University of Michigan at Ann Arbor ( email )

Sara LaLumia

Williams College - Department of Economics ( email )

Fernald House
Williamstown, MA 01267
United States

Shanthi Ramnath

Federal Reserve Bank of Chicago ( email )

Michael Stevens

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

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