Working Paper: NBER ID: w0706
Authors: Shelly Lundberg
Abstract: In this paper, the added worker effect is interpreted as a response to uncertain returns to labour supply offers by members of a household. A model of household labour supply is developed In which each member's current labour force status affects the job search and participation decisions of the other and thus the probabilities of observed transitions between the states of employment, unemployment, and non-participation. The determinants of actual household transitions are then investigated using continuous employment histories for a sample of low-income families. Simulations using the estimated transition functions show that increased unemployment among married men has a sizeable short-run effect on both participation and employment of married women.
Keywords: Labor Supply; Unemployment; Household Economics
JEL Codes: J22; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment of male head of household (J64) | Labor supply decisions of married women (J22) |
| Increased unemployment among husbands (J12) | Participation and employment rates of married women (J12) |
| Unemployment of male head (J64) | Probability of labor force entry for the wife (J21) |
| Reduction in household income (H31) | Labor force participation among wives (D13) |
| Increase in husband's nonmarket time (D13) | Labor force participation among wives (D13) |