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Job Displacement, Family Dynamics and Spousal Labor Supply

Author

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  • Halla, Martin

    (University of Linz)

  • Schmieder, Julia
  • Weber, Andrea

    (Central European University)

Abstract

We study interdependencies in spousal labor supply and the effectiveness of intrahousehold insurance in a sample of married couples, where the husband loses his job due to a mass layoff or plant closure using data from the Austrian Social Security Database. We show that in our sample of relatively young couples the shock hits households at crucial stages of family formation, which requires careful modeling of the wives' counterfactual lifecycle labor market patterns. In our empirical analysis, we propose three independent control groups of unaffected households to identify the causal effects of husbands' displacement on wives' labor supply. Our empirical results show that husbands suffer large and persistent employment and earnings losses over the first 5 years after displacement. But wives' labor supply increases only moderately and they respond predominantly at the extensive margin. The implied participation elasticity with respect to the husband's earnings shock is very small, about -0:04. While the wives' earnings gains recover only a tiny fraction of the household income loss, public transfers and taxes are a more important insurance at least in the short run. In terms of non-labor market related outcomes, we find a small positive effect on the probability of divorce, but no effect of the husband's job displacement on fertility. The presence and ages of children in the household are crucial determinants of the wife's labor supply response. The most responsive group are mothers, who are planning to return to the labor market after a maternity break, while mothers of very young children or wives without children remain unresponsive. We thus conclude that Austria's strong gender identity norms are an explanation for the limited scope of intra-household insurance.

Suggested Citation

  • Halla, Martin & Schmieder, Julia & Weber, Andrea, 2018. "Job Displacement, Family Dynamics and Spousal Labor Supply," IZA Discussion Papers 11752, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11752
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    3. Alexander Ahammer & Dominik Grübl & Rudolf Winter-Ebmer, 2020. "The health externalities of downsizing," CDL Aging, Health, Labor working papers 2020-05, The Christian Doppler (CD) Laboratory Aging, Health, and the Labor Market, Johannes Kepler University Linz, Austria.
    4. Juliane Hennecke & Astrid Pape, 2020. "Suddenly a Stay-At-Home Dad? Short- and Long-term Consequences of Fathers’ Job Loss on Time Investment in the Household," SOEPpapers on Multidisciplinary Panel Data Research 1112, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Daniel Fackler & Eva Weigt, 2020. "Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State," LABOUR, CEIS, vol. 34(3), pages 239-276, September.
    6. Gathmann, Christina & Huttunen, Kristiina & Jernström, Laura & Sääksvuori, Lauri & Stitzing, Robin, 2020. "In Sickness and in Health: Job Displacement and Health Spillovers in Couples," IZA Discussion Papers 13329, Institute of Labor Economics (IZA).
    7. Jan Gromadzki, 2019. "The Added Worker Effect, Employment Contracts, and the Reasons for the Wife’s Inactivity," IBS Working Papers 02/2019, Instytut Badan Strukturalnych.
    8. Lluis, Stephanie & McCall, Brian, 2022. "Spousal labour supply adjustments to extended benefits weeks: Evidence from Canada," CLEF Working Paper Series 42, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    9. Hannah Illing & Johannes F. Schmieder & Simon Trenkle, 2021. "The Gender Gap in Earnings Losses after Job Displacement," NBER Working Papers 29251, National Bureau of Economic Research, Inc.
    10. Meekes, Jordy & Hassink, Wolter, 2020. "Fired and Pregnant: Gender Differences in Job Flexibility Outcomes after Job Loss," IZA Discussion Papers 13779, Institute of Labor Economics (IZA).
    11. Antoine Bertheau & Edoardo Acabbi & Cristina Barceló & Andreas Gulyas & Stefano Lombardi & Raffaele Saggio, 2022. "The Unequal Consequences of Job Loss across Countries," CRC TR 224 Discussion Paper Series crctr224_2022_351, University of Bonn and University of Mannheim, Germany.
    12. Guner, Nezih & Kulikova, Yuliya & Valladares-Esteban, Arnau, 2020. "Does the Added Worker Effect Matter?," IZA Discussion Papers 12923, Institute of Labor Economics (IZA).
    13. Schøne, Pål & Strøm, Marte, 2021. "International labor market competition and wives’ labor supply responses," Labour Economics, Elsevier, vol. 70(C).
    14. Andreas Gulyas & Krzysztof Pytka, 2019. "Understanding the Sources of Earnings Losses After Job Displacement: A Machine-Learning Approach," CRC TR 224 Discussion Paper Series crctr224_2019_131, University of Bonn and University of Mannheim, Germany.
    15. Schone, Pal & Strom, Marte, 2019. "International Labor Market Competition and Spousal Labor Supply Responses," IZA Discussion Papers 12857, Institute of Labor Economics (IZA).
    16. Jonas Meier, 2020. "Multivariate Distribution Regression," Diskussionsschriften dp2023, Universitaet Bern, Departement Volkswirtschaft.
    17. Martinoty, Laurine, 2022. "Partner’s income shock and female labor supply. Evidence from the repeal of Argentina’s convertibility law," World Development, Elsevier, vol. 159(C).
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    More about this item

    Keywords

    firm events; household labor supply; intra-household insurance; added worker effect;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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