Decomposing the Labour Supply Response to Spousal Death: Evidence from a Dynamic Event–Study Design

This paper provides a first dynamic decomposition, within a cohort-stacked event study framework, of labour supply adjustments following spousal death into extensive (participation) and intensive (hours) margins. Using longitudinal data from the Survey of Health, Ageing and Retirement in Europe (SHARE), I analyse individuals aged 55–75 to examine how bereavement shocks translate into labour supply shifts in later life. The results indicate that labour supply does not increase immediately but instead rises gradually, beginning approximately one year after bereavement. This adjust- ment is driven almost entirely by the extensive margin—specifically labour market re-entry—rather than by adjustments in hours among those already employed. Furthermore, I find that both the timing and magnitude of these responses are jointly shaped by shock characteristics and institutional context. Predictable deaths trigger stable, participation-centred adjustments from the short run, whereas responses to sudden deaths appear delayed and less stable over event time. Regional comparisons reveal that institutional environments, such as labour market flexibility and social pro- tection structures, condition which adjustment margins are feasible. These findings suggest that labour supply at older ages adapts to household shocks primarily through discrete participation shifts, shaped by the nature of the shock and available institu- tional pathways.