Abstract
Using bivariate random-effects probit estimation on data from the German Socio-Economic Panel we show that women respond to their partners’ unemployment with an increase in labor market participation, which also leads to an increase in their employment probability. Our analysis considers within and between effects separately, revealing differences in the relationships between women’s labor market statuses and their partners’ unemployment in the previous period (within effect) and their partners’ overall probability of being unemployed (between effect). Furthermore, we contribute to the literature by demonstrating that a partner’s employment in a low-paid job has an effect on women’s labor market choices and outcomes similar to that of his unemployment.
Highlights
Many important decisions in an individual’s life are made within the context of a couple/nuclear family or are, at least partially, driven by considerations for the family as a whole
A woman whose partner was unemployed in the previous period is 2.7 percentage points more likely to participate in the labor market and 2.0 percentage points more likely to be currently employed than a woman whose partner was high-paid
2.2 percentage points more likely to participate in the labor market and 1.5 percentage points more likely to be employed
Summary
Many important decisions in an individual’s life are made within the context of a couple/nuclear family or are, at least partially, driven by considerations for the family as a whole. Living with a partner (potentially) allows for specialization, insurance mechanisms and economies of scale in consumption within the family. Given this prominent role of the family a growing body of the economic literature is devoted. One possible response of the family to the job loss of the primary earner could be an increase in the labor supply of the other partner. While the added worker effect, defined by Lundberg (1985, p.11) as “a temporary increase in the labor supply of married women whose husbands have become unemployed”, has been investigated by several empirical studies, the evidence is not conclusive, when considering responses at the extensive margin (see for example Lundberg 1985; Maloney 1991; Stephens 2002; Kohara 2010; Triebe 2015). Variations in findings could be explained by differences in the definition of the added worker effect and estimation technique as well as differences across countries and time periods
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