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Spousal spillovers in the labor market: A structural assessment

Author

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  • Sigurd Galaasen

    (Norges Bank)

  • Herman Kruse

    (Statistics Norway)

Abstract

We explore the importance and nature of elderly couples' labor market interlinkages, and how such linkages shape the response to welfare reforms. To this end, we develop a life-cycle model featuring dual-earner households with heterogeneous age gaps, non-separable leisure preferences, and endogenous retirement. To inform key preference parameters, our calibration exploits quasi-experimental evidence of spousal retirement spillovers from a pension reform in Norway. We show that the experimental evidence is highly informative about the degree of non-separability of leisure and that a substantial level of complementarity is required to match the data. Using our calibrated model, we find that the commonly observed tendency of couples to retire together, despite considerable age-gap heterogeneity, can be entirely explained by leisure complementarities. Moreover, comparing to a model with leisure separability reveals that one-third of the long-run labor supply effect of the pension reform is attributed to complementarity. This illustrates the importance of accounting for interdependent decisions when evaluating policy reforms. (Copyright: Elsevier)

Suggested Citation

  • Sigurd Galaasen & Herman Kruse, 2025. "Spousal spillovers in the labor market: A structural assessment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 58, October.
    • Handle: RePEc:red:issued:24-21
    DOI: 10.1016/j.red.2025.101300
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    Keywords

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    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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