Working Papers

• Spousal Labor Response to Primary Income: Identification and Heterogeneity (with  Elin Halvorsen  and Marios Karabarbounis). 

We present a new estimate for the elasticity of spousal labor supply in response to changes in the primary worker's income, the so-called ``added worker effect." By leveraging firm-side information of the primary worker as an instrument, we isolate income changes that are uncorrelated with the spouse's productivity, addressing endogeneity bias.  We find an economically meaningful role for the spousal labor supply, especially among young households with limited financial assets. We construct a heterogeneous agent model consistent with the estimated spousal employment response to design a government transfer program that effectively mitigates the negative income shock. 

• Asymmetric Frisch Elasticity of Labor Supply (with  Sun-Bin Kim  and Junseok Lee). 

We propose an economic mechanism that generates asymmetric Frisch labor supply elasticities. Based on the Australian panel data (HILDA), we document two stylized facts on labor supply: (i) asymmetric distribution of hours gap between preferred and actual hours of work: a pronounced concentration of workers whose actual hours are larger than preferred ones (workers are on average over-employed), and (ii) a persistently declining age profile of preferred working hours (relative to actual hours) over the life cycle . We build a heterogeneous agent model that matches these facts and, as a result, generates asymmetric responses of hours at the aggregate level.  Our results justify a use of sizeable aggregate Frisch elasticities for the business cycle analysis and, at the same time, such labor supply schedule is still compatible with small elasticities found from the studies based on tax holidays.