Did the Great Recession force female spouses to work?Added Worker Effect in the U.S. labor market in 2008

In this study, we investigate whether female spouses increased quantity of labor supply to compensate for lost earnings in households where male breadwinners became unemployed during the Great Recession. We derive the equation for empirical analysis from the household lifecycle labor supply model by using first order conditions of utility optimization, and estimate the equation using Panel Study of Income Dynamics (PSID) dataset. By estimating data applying three econometric techniques on panel data analysis, signs of estimated coefficients in all samples support our AWE hypothesis. The size of coefficients indicating AWE are especially larger in ethnic and housing asset sub-sample minority groups who most intensely felt the effects of the Great Recession. In these groups, we find that female spouses’ leisure consumption decrease to 0.037-0.048 hours per week. Compared to previous studies on this topic, the size and significance of our study is much greater, implying that some groups of female spouses in the Great Recession could have increased their labor market working hour to compensate for income loss from their male breadwinner’s job displacement.