The rise of the added worker effect

- The added worker effect has increased from 4.68% to 8.3% over the last decades.
- We develop a simple family search model to explain this rise.
- A lower gender pay gap and lower labor frictions explain 85% of the increase.

We document that the added worker effect (AWE) has increased over the last three decades. We develop a search model with two earner households and we illustrate that the increase in the AWE from the 1980s to the 2000s can be explained through (i) the narrowing of the gender pay gap, (ii) changes in the frictions in the labor market and (iii) changes in the labor force participation costs of married women.