Why Do Women Married to Unemployed Men Have Low Participation Rates?

In a number of countries, women married to unemployed men have lower participation rates in paid work than do wives of employed men -the reverse situation of that suggested by the added worker effect. One possibility is that the employment status of the husband proxies characteristics of the wife associated with a low probability of her being employed. Another is that the labour supply of the wife may be affected by the type of unemployment benefit received by her husband, a disincentive effect arising when this benefit is means-tested on family income. We investigate these issues using panel data on married women in Germany covering five years. The panel nature of the data is used to control for unobservable fixed-effects which may be correlated with the husband's employment status and type of benefit if unemployed.