Job Displacement, Family Dynamics and Spousal Labor Supply
- American Economic Journal: Applied Economics (Forthcoming)
We study the effectiveness of intra-household insurance among
married couples when the husband loses his job due to a mass lay-
off or plant closure. Empirical results based on Austrian administrative data show that husbands suffer persistent employment and
earnings losses, while wives' labor supply increases moderately due
to extensive margin responses. Wives' earnings gains recover only
a tiny fraction of the household income loss and, in the short-term,
public transfers and taxes are a more important form of insurance.
We show that the presence of children in the household is a crucial
determinant of the wives' labor supply response.
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