The Insurance Role of Household Labor Supply for Older Workers

Abstract

In this paper, we explore and compare how older and younger couple house- holds use adjustments in the wife’s labor supply to mitigate the e?ects of negative shocks to the husband’s employment status. Using di?erence-in-di?erences match- ing methods, we document a substantial added worker e?ect for younger house- holds. However, the wives of older men do not increase employment in response to their husbands’ negative employment shocks. Instead, in older households, fe- male unemployment increases. These results are consistent with older women being constrained by the labor market in the extent to which they can adjust their labor supply to mitigate the e?ects of spousal employment shocks. Our ?ndings suggest that spousal labor supply is not an e?ective intra-household insurance device for older households.