"Assortative matching and risk-sharing of French couples"

Abstract : 

How individuals response to earnings risk in an important question for government policies as unemployment insurance and income taxation. This paper measures the risk–sharing behavior through coordinated labor supply in response to earnings risk by directly measuring the covariance of earnings risk of French couples. We estimate a simple model of earnings process to identify earnings risk. We then disentangle this risk into two parts : a behavioral covariance part and the covariance part caused by assortative matching. In order to do so we perform a conditional random matching among couples of the same characteristics as age and education to estimate the covariance part caused by assortative matching. A negative sign of the derived behavioral covariance of couples would be interpreted as an evidence of earning risk-sharing within couples. We find no evidence of such risk-sharing behavior among French couples. This result is in line with most empirical work on the topic in the developed countries context.