DP14346 Does the Added Worker Effect Matter?

Author(s): Nezih Guner, Yuliy Kulikova, Arnau Valladares Esteban
Publication Date: January 2020
Keyword(s): Cyclicality, female employment, Household Labor Supply, Intra-household Insurance, Skewness
JEL(s): D1, E32, J21, J22
Programme Areas: Labour Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14346

The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners' job loss. We propose a new method to calculate the AWE, which allows us to estimate its effect on any labor market outcome. We show that without the AWE reduces the fraction of households with two non-employed members. The AWE also accounts for why women's employment is less cyclical and symmetric compared to men. In recessions, while some women lose their employment, others enter the labor market and find jobs. This keeps the female employment relatively stable.