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In this paper we document that married individuals face a lower unemployment rate than their single counterparts. We refer to this phenomenon as the marriage unemployment gap. Despite dramatic demographic changes in the labor market over the last decades, this gap has been remarkably stable both for men and women. Using a flow-decomposition exercise, we assess which transition probabilities (across labor force states) are behind this phenomenon: For men, the main driver is the higher job losing probabilities faced by single workers. For females, the participation margin also plays a crucial role.
We study unemployment insurance in a framework where the main source of heterogeneity among agents is the type of household they live in: some agents live alone while others live with their spouses as a family. Our exercise is motivated by the fact that married individuals can rely on spousal income to smooth labor market shocks, while singles cannot. We extend a version of the standard incompletemarkets model to include two-agent households and calibrate it to the US economy with special emphasis on matching differences in labor market transitions across gender and marital status as well as aggregate wealth moments. Our central finding is that changes to the current unemployment insurance program are valued differently by married and single households. In particular, a more generous unemployment insurance reduces the welfare of married households significantly more than that of singles and vice versa. We show that this result is driven by the amount of self-insurance existing in married households, and thus, we highlight the interplay between self-and government-provided insurance and its implication for policy.
We use a simple macroeconomic model to illustrate the difference between the Frisch elasticity, understood as a structural behavioural parameter, and the elasticity of labour measured through a tax holiday; a setup used in the micro-applied literature to measure the responsiveness of labour to changes in the returns to work.We show that a high Frisch elasticity is compatible with a measured elasticity of the same order of magnitude as the micro-applied estimates.
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