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For Better, For Worse: Intrahousehold Risk-Sharing over the Business Cycle

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  • Stephen H. Shore

    (Johns Hopkins University)

Abstract

Marriage allows couples to diversify labor income risks and dynamically coordinate labor supply decisions in response to shocks. This paper argues that these risk-sharing benefits of marriage are countercyclical; husbands' and wives' income changes are more positively correlated when the economy is growing rapidly. As a result, while individuals face more idiosyncratic income risk in bad times than in good, households do not. I exploit variation in the cross-sectional covariance of husbands' and wives' incomes to infer the covariance of past income changes. Couples with marriages spanning periods of greater economic expansion have more positively correlated incomes in the cross-section. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Stephen H. Shore, 2010. "For Better, For Worse: Intrahousehold Risk-Sharing over the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 536-548, August.
    • Handle: RePEc:tpr:restat:v:92:y:2010:i:3:p:536-548
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    Citations

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    Cited by:

    1. Andrew E. Clark & Conchita D’Ambrosio & Anthony Lepinteur, 2023. "Marriage as insurance: job protection and job insecurity in France," Review of Economics of the Household, Springer, vol. 21(4), pages 1157-1190, December.
    2. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1789-1891, Elsevier.
    3. Osea Giuntella & Lorenzo Rotunno & Luca Stella, 2021. "Trade Shocks, Fertility, and Marital Behavior," DISCE - Working Papers del Dipartimento di Economia e Finanza def100, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    4. Haomin Wang, 2019. "Intra-Household Risk Sharing and Job Search over the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 165-182, October.
    5. Osea Giuntella & Lorenzo Rotunno & Luca Stella, 2022. "Globalization, Fertility and Marital Behavior in a Lowest-Low Fertility Setting," CESifo Working Paper Series 9755, CESifo.
    6. Lauren Hoehn-Velasco & Jose Roberto Balmori de la Miyar & Adan Silverio-Murillo & Sherajum Monira Farin, 2023. "Marriage and divorce during a pandemic: the impact of the COVID-19 pandemic on marital formation and dissolution in Mexico," Review of Economics of the Household, Springer, vol. 21(3), pages 757-788, September.
    7. Albanesi, Stefania & Kim, Jiyeon, 2021. "The Gendered Impact of the COVID-19 Recession on the US Labor Market," CEPR Discussion Papers 15838, C.E.P.R. Discussion Papers.
    8. Haomin Wang, 2019. "Intra-Household Risk Sharing and Job Search over the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 165-182, October.
    9. Paciorek, Andrew & Sinai, Todd, 2012. "Does home owning smooth the variability of future housing consumption?," Journal of Urban Economics, Elsevier, vol. 71(2), pages 244-257.
    10. Bastian Schulz & Fabian Siuda, 2020. "Marriage and Divorce: The Role of Labor Market Institutions," CESifo Working Paper Series 8508, CESifo.
    11. Hamid Baghestani & Michael Malcolm, 2014. "Marriage, divorce and economic activity in the US: 1960--2008," Applied Economics Letters, Taylor & Francis Journals, vol. 21(8), pages 528-532, May.
    12. Whalley, Alexander, 2011. "Education and labor market risk: Understanding the role of data cleaning," Economics of Education Review, Elsevier, vol. 30(3), pages 528-545, June.
    13. Stefania Albanesi & Maria Jose Prados, 2022. "Slowing Women’s Labor Force Participation: The Role of Income Inequality," Working Papers 2022-037, Human Capital and Economic Opportunity Working Group.
    14. Shane T. Jensen & Stephen H. Shore, 2015. "Changes in the Distribution of Earnings Volatility," Journal of Human Resources, University of Wisconsin Press, vol. 50(3), pages 811-836.
    15. Mizuki Komura & Hikaru Ogawa, 2022. "COVID-19, marriage, and divorce in Japan," Review of Economics of the Household, Springer, vol. 20(3), pages 831-853, September.
    16. Henry R. Hyatt, 2015. "Co-Working Couples and the Similar Jobs of Dual-Earner Households," Working Papers 15-23, Center for Economic Studies, U.S. Census Bureau.
    17. Stephen Shore, 2015. "The co-movement of couples’ incomes," Review of Economics of the Household, Springer, vol. 13(3), pages 569-588, September.
    18. Henry R. Hyatt, 2015. "Co-Working Couples and the Similar Jobs of Dual-Earner Households," Working Papers 15-23r, Center for Economic Studies, U.S. Census Bureau.
    19. Huber, Katrin & Winkler, Erwin, 2019. "All you need is love? Trade shocks, inequality, and risk sharing between partners," European Economic Review, Elsevier, vol. 111(C), pages 305-335.

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