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Worker Displacement and the Added Worker Effect

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  • Melvin Stephens

    (Carnegie Mellon University and National Bureau of Economic Research)

Abstract

This article examines the "added worker effect," which is the labor supply response of wives to their husbands' job losses. Unlike past studies, which focused on the husbands' current unemployment status, this article analyzes wives' responses before and after job losses to examine the life-cycle labor supply adjustments. Using Panel Study of Income Dynamics data reveals small predisplacement effects and large, persistent postdisplacement effects. The timing of the responses differs with type of displacement, possibly because of differences in the information acquired before job loss. Long-run labor supply increases compensate for over 25% of the husbands' lost income.

Suggested Citation

  • Melvin Stephens, 2002. "Worker Displacement and the Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 504-537, July.
    • Handle: RePEc:ucp:jlabec:v:20:y:2002:i:3:p:504-537
    DOI: 10.1086/339615
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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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