FEMALE LABOR SUPPLY AS INSURANCE AGAINST IDIOSYNCRATIC RISK | Zendy

Attanasio Orazio | Zendy; Low Hamish | Zendy; SánchezMarcos Virginia | Zendy

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FEMALE LABOR SUPPLY AS INSURANCE AGAINST IDIOSYNCRATIC RISK

Author(s) -

Attanasio Orazio,

Low Hamish,

SánchezMarcos Virginia

Publication year - 2005

Publication title -

journal of the european economic association

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.792

H-Index - 93

eISSN - 1542-4774

pISSN - 1542-4766

DOI - 10.1162/jeea.2005.3.2-3.755

Subject(s) - systematic risk , labour economics , economics , business , actuarial science , financial economics

In this paper, we explore the role of female labor supply as an insurance mechanism against idiosyncratic earnings risk within the family. We use a life‐cycle model in which a unitary family makes consumption, saving, and labor supply decisions. Additional uncertainty increases female participation rates. This effect on participation is greatest when the ability to borrow (and hence to smooth consumption) is limited. We calculate the welfare cost of increases in uncertainty and show that the welfare cost is greater when households are unable to adjust female labor supply. (JEL: J22, D91)

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