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Does Unemployment Insurance Crowd out Spousal Labor Supply?

Julie Berry Cullen and Jonathan Gruber
Journal of Labor Economics
Vol. 18, No. 3 (July 2000), pp. 546-572
DOI: 10.1086/209969
Stable URL: http://www.jstor.org/stable/10.1086/209969
Page Count: 27
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Does Unemployment Insurance Crowd out Spousal Labor Supply?
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Abstract

Previous research on unemployment insurance (UI) has emphasized the program's effect on individual search behavior. This state‐contingent income may also reduce the labor supply of family members during the unemployment spell. We investigate this question within the context of wives' labor supply responses to their husbands' unemployment spells. We find strong “crowdout” of this form of family self‐insurance; our estimates imply that for each dollar of UI receipt wives earn up to 73 cents less. The reduction in spousal hours of work is over 40% as large as previous estimates of the effect of UI on search time of husbands.

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