Does the added worker effect matter?

Guner, N., Kulikova, Y., & Valladares-Esteban, A. (2025). Does the added worker effect matter? Review of Economic Dynamics 56 e101271. 10.1016/j.red.2025.101271.

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Abstract

In the US, the likelihood of a married woman entering the labor force in a given month increases by 60% if her husband loses his job, known as the added worker effect. However, only 1.5% to 3.5% of married women entering the labor force in a given month can be added workers. This raises the question of whether the added worker effect can significantly impact aggregate labor market outcomes. Building on Shimer (2012), we introduce a new methodology to evaluate how joint transitions of married couples across labor market states affect aggregate participation, employment, and unemployment rates. Our results show that the added worker effect significantly impacts aggregate outcomes, increasing married women's participation and employment by 0.72 and 0.65 percentage points each month. Additionally, the added worker effect reduces the cyclicality of married women's participation and unemployment, lowering the correlation between GDP's cyclical components and participation by 4.5 percentage points and unemployment by 8 percentage points.

Item Type:	Article
Uncontrolled Keywords:	Added worker effect, Household labor supply, Intra-household insurance, Female employment, Cyclicality
Research Programs:	Economic Frontiers (EF)
Depositing User:	Luke Kirwan
Date Deposited:	25 Feb 2025 08:15
Last Modified:	25 Feb 2025 08:15
URI:	https://pure.iiasa.ac.at/20425

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