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Spousal Labor Supply, Caregiving, and the Value of Disability Insurance

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  • Siha Lee

Abstract

For married couples, spousal labor supply can act as a household insurance mechanism against one spouse’s earnings shock. This paper examines married women’s time allocation to market hours and spousal care in the event of their husbands’ disability and its implications for evaluating the insurance value of the Social Security Disability Insurance (SSDI) program. Using an event study approach, I find that while there is a sizable increase in wives’ working hours after their husbands’ job displacement, wives’ labor supply responses to their husbands’ disability are small, and instead, a considerable amount of time is spent in spousal care. I develop and estimate a dynamic model of married households and find that incorporating time loss due to spousal care increases the insurance value of SSDI relative to its costs. Furthermore, budget-neutral policy reforms that subsidize the cost of care can improve social welfare.

Suggested Citation

  • Siha Lee, 2023. "Spousal Labor Supply, Caregiving, and the Value of Disability Insurance," Department of Economics Working Papers 2020-08, McMaster University.
    • Handle: RePEc:mcm:deptwp:2020-08
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    Cited by:

    1. Seitz, Sebastian, 2023. "Estimating the Moral Hazard Cost of Private Disability Insurance and its Welfare Consequences," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277648, Verein für Socialpolitik / German Economic Association.
    2. Charlene Marie Kalenkoski & Sabrina Wulff Pabilonia, 2023. "Parental disability and teenagers’ time allocation," Review of Economics of the Household, Springer, vol. 21(4), pages 1379-1407, December.
    3. Jonas Meier, 2020. "Multivariate Distribution Regression," Diskussionsschriften dp2023, Universitaet Bern, Departement Volkswirtschaft.
    4. Das, Debasmita, 2022. "Child-rearing, Social Security and Married Women’s Labor Supply over the Life Cycle," MPRA Paper 117614, University Library of Munich, Germany, revised 10 Sep 2022.

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    More about this item

    Keywords

    disability; social security; added worker effect; caregiving;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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