The Means Testing of Benefits and the Labour Supply of the wives of Unemployed Men: Results from a Fixed Effects Model

Women married to unemployed men in Britain have lower participation rates than those married to employed men. Possible reasons include unfavourable local labour market conditions affecting both, their both having poor labour market characteristics, and the means testing of benefits, which creates a disincentive for the wife to work. Using a British panel survey of unemployed men and their families, the means testing effect is estimated; unobservable characteristics are accounted for by using a fixed effects model. The results show no effect of means testing on the labour supply of the wives.