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Family Job Search and Wealth: The Added Worker Effect Revisited

System Working Paper 20-06 | Published July 17, 2020

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J. Ignacio García-Pérez Universidad Pablo de Olavide and FEDEA
Sílvio Rendon Federal Reserve Bank of Philadelphia
Family Job Search and Wealth: The Added Worker Effect Revisited


We propose and estimate a model of family job search and wealth accumulation with data from the Survey of Income and Program Participation (SIPP). This dataset reveals a very asymmetric labor market for household members who share that their job finding is stimulated by their partners' job separation. We uncover a job search-theoretic basis for this added worker effect, which occurs mainly during economic downturns, but also by increased non-employment transfers. Thus, our analysis shows that the policy goal of increasing non-employment transfers to support a worker's job search is partially offset by the spouse's cross effect of decreased non-employment and wages. The added worker effect is robust to having more children and more education in the household and does not just result as a composition of heterogeneous individuals. We also show that the interdependency between household members is understated if wealth and savings are not considered. Finally, we show that gender equality in the labor market not only improves women's labor market performance, but it also increases men's accepted wages and non-employment rates.