Events

Dr. Todd Schoellman
Senior Research Economist
Federal Reserve Bank of Minneapolis

We study intra-household insurance through spousal labor supply across countries with widely varying income levels. Empirically, we use new harmonized microdata from quarterly rotating-panel labor-force surveys in 35 countries to investigate how wives’ labor market transitions co-move with their husbands’ labor market outcomes. On average, poorer countries are characterized by both a larger “added worker effect” (employment entry upon spousal job loss) and “subtracted worker effect” (dropping out of employment when the husband finds a job). We interpret these patterns through the lens of a life-cycle model with two-member households, frictional formal labor markets and self-employment, as well as endogenous human capital and asset accumulation. While lower income levels and less developed asset markets can account for a higher added worker effect in poorer countries, stricter gender norms are needed to also replicate the larger subtracted worker effect.