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Does the Added Worker Effect Matter?

Author

Listed:
  • Nezih Guner

    (CEMFI)

  • Yuliya Kulikova

    (Bank of Spain)

  • Arnau Valladares-Esteban

    (University of St. Gallen)

Abstract

In the US, the likelihood of a married woman entering the labor force in a given month increases by 60% if her husband loses his job, known as the added worker effect. However, only 1.5% to 3.5% of married women entering the labor force in a given month can be added workers. This raises the question of whether the added worker effect can significantly impact aggregate labor market outcomes. Building on Shimer (2012), we introduce a new methodology to evaluate how joint transitions of married couples across labor market states affect aggregate participation, employment, and unemployment rates. Our results show that the added worker effect significantly impacts aggregate outcomes, increasing married women's participation and employment by 0.72 and 0.65 percentage points each month. Additionally, the added worker effect reduces the cyclicality of married women's participation and unemployment, lowering the correlation between GDP's cyclical components and participation by 4.5 percentage points and unemployment by 8 percentage points.

Suggested Citation

  • Nezih Guner & Yuliya Kulikova & Arnau Valladares-Esteban, 2024. "Does the Added Worker Effect Matter?," Working Papers 2024-015, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2024-015
    Note: FI
    as

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Guner_Kulikova_Valladares-Esteban_2024_does-added-worker-effect-matter.pdf
    File Function: First version, August 7, 2024
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    Keywords

    household labor supply; intra-household insurance; female employment; cyclicality;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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