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Intra-household labour supply after an unemployment event: The added worker effect

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Abstract

In this paper we explore one of the oldest labour market phenomena documented in the literature: the added worker effect, which refers to the labour supply response of secondary workers to main earners´ job losses. To do so we take advantage of the panel data survey conducted by a Colombian Foundation, Fedesarrollo between 2007 and 2010, using a fixed effects model to account for household´s specific time invariant unobserved heterogeneity. Our results suggest that when the head of the household becomes unemployed, the labour force participation rate of their female partner increases between 9 and 20 percentage points. Such response appears during the first six months of household head´s unemployment. In addition, within one year of the head of the family becoming unemployed, their children are more likely to enter the labour market and less likely to be in tertiary education.

Suggested Citation

  • Lina Cardona-Sosa & Luz Adriana Flórez & Leonardo Morales Zurita, 2016. "Intra-household labour supply after an unemployment event: The added worker effect," Borradores de Economia 944, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:944
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    References listed on IDEAS

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    1. Mark Dynarski & Steven M. Sheffrin, 1987. "Consumption and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 411-428.
    2. Martha Bottia & Lina Cardona-Sosa & Carlos Medina, 2012. "El SISBEN como mecanismo de focalización individual del régimen subsidiado en salud en Colombia: ventajas y limitaciones," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, December.
    3. Ashenfelter, Orley, 1980. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Econometrica, Econometric Society, vol. 48(3), pages 547-564, April.
    4. Castro Urbano, Emma Beatriz & García Cruz, Gustavo Adolfo & Badillo Enciso, Erika Raquel, 2011. "La participación laboral de la mujer casada y su cónyuge en Colombia: Un enfoque de decisiones relacionadas," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE, June.
    5. Ortigueira, Salvador & Siassi, Nawid, 2013. "How important is intra-household risk sharing for savings and labor supply?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 650-666.
    6. Congregado, Emilio & Golpe, Antonio A. & van Stel, André, 2011. "Exploring the big jump in the Spanish unemployment rate: Evidence on an 'added-worker' effect," Economic Modelling, Elsevier, vol. 28(3), pages 1099-1105, May.
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    8. Susan Parker & Emmanuel Skoufias, 2004. "The added worker effect over the business cycle: evidence from urban Mexico," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 625-630.
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    11. Laurine Martinoty, 2014. "Intra-Household Coping Mechanisms in Hard Times: the Added Worker Effect in the 2001 Argentine Economic Crisis," Post-Print halshs-01076566, HAL.
    12. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
    13. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-572, July.
    14. Tindara Addabbo & Paula Rodríguez-Modroño & Lina Gálvez-Muñoz, 2013. "Gender and the Great Recession: Changes in labour supply in Spain," Department of Economics (DEMB) 0010, University of Modena and Reggio Emilia, Department of Economics "Marco Biagi".
    15. Xiaodong Gong, 2011. "The Added Worker Effect for Married Women in Australia," The Economic Record, The Economic Society of Australia, vol. 87(278), pages 414-426, September.
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    More about this item

    Keywords

    unemployment; labour force participation; labour supply; fixed effects;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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