Partner’s income shock and female labor supply. Evidence from the repeal of Argentina’s convertibility law

Female employment is an important vector of economic development. Using data on couples in urban Argentina from 1996 to 2007, I show that in the short and medium term necessity shapes female participation and employment at the extensive and intensive margins. More specifically, I study how women’s labor supply reacts to negative income shocks affecting their partner. In order to assess the causal impact, I exploit the unexpected evolution of the economic environment triggered by the repeal of the convertibility law in January 2002 to instrument men’s job loss. I find that women’s probability of participating and finding a job is multiplied by 2 upon their partner’s displacement. Turning to the dynamics of their labor supply, contrary to expectations, however, women do not symmetrically withdraw from the labor market once their partner finds a job. Evidence on repeated cross-sections confirms that the labor supply response persists long after the economic recovery. My findings are among the first attempts to evaluate the participation effects of temporary shocks in the medium term.