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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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    Cited by:

    1. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    2. 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.
    3. 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.
    4. 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.
    5. Stephen Shore, 2015. "The co-movement of couples’ incomes," Review of Economics of the Household, Springer, vol. 13(3), pages 569-588, September.

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