Does Spousal Labor Smooth Fluctuations in Husbands Earnings? the Role of Liquidity Constraints Mercedes García-Escribano

ISBN: 9781281155405

Published: September 25th 2013

ebook

44 pages


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Does Spousal Labor Smooth Fluctuations in Husbands Earnings? the Role of Liquidity Constraints  by  Mercedes García-Escribano

Does Spousal Labor Smooth Fluctuations in Husbands Earnings? the Role of Liquidity Constraints by Mercedes García-Escribano
September 25th 2013 | ebook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, ZIP | 44 pages | ISBN: 9781281155405 | 7.44 Mb

This paper theoretically and empirically investigates the role of spousal labor in buffering transitory shocks to husbands earnings. To measure the amount of the shock that spousal labor absorbs, an instrumented cross-sectional varianceMoreThis paper theoretically and empirically investigates the role of spousal labor in buffering transitory shocks to husbands earnings. To measure the amount of the shock that spousal labor absorbs, an instrumented cross-sectional variance decomposition is developed. Using data from the Panel Study of Income Dynamics, the paper finds that the smoothing resulting from the wives labor response (both labor force participation and hours of work) is larger for households with limited access to credit.

This finding, which is consistent with the models prediction, indicates that because of the presence of liquidity constraints, the temporal change in family income (exclusive of wives earnings) reinforces the substitution effect in explaining the effect of shocks to the husbands earnings on spousal labor.



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