Older couples’ labour market reactions to family disruptions

Abstract

In this paper, I analyse how spouses in older couples react to ‘shocks’ or ‘surprises’ in their partner’s labour income using data from the British Household Panel Survey, 1991-2004. Wives’ labour supply proves to be much more sensitive to shocks than husbands’. After a divorce or separation, wives reduce their labour supply while the effect on husbands’ labour supply is positive or not statistically significant. If a wife becomes unemployed, it does not affect her husband’s labour supply while wives
whose husband becomes unemployed reduce their labour supply, too. A decline in husband’s health causes the wife to reduce her working hours while husbands tend to increase their labour supply when facing a decline in wife’s health. Partner’s death does not have statistically significant labour supply effects. Negative income shocks due to other reasons (such as choice) tend to reduce partner’s labour supply and vice versa, but only slightly.